REQUIRED: Prepare a journal entry (or entries) on Pam's books to account for the pooling of interests. (Hint: Do not forget to consider the 2,000 shares of Sun held by Pam on January 1, 2000.)
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
![[Appendix] Journal entries to record a pooling
On January 1, 2000, Pam Corporation held 2,000 shares of Sun Corporation common stock acquired at $15 per share
several years earlier. On this date, Pam issued 1.5 of its $10 par value shares for each of the other 98,000 outstand-
ing shares of Sun in a pooling of interests in which Sun Corporation was dissolved. Sun Corporation's after-closing
trial balance on December 31, 1999, consisted of the following (in thousands):
$ 800
1,500
Current assets
Plant and equipment-net
Liabilities
Capital stock, $5 par
Additional paid-in capital
Retained earnings
$ 200
500
1,000
600
$2,300
$2,300
REQUIRED: Prepare a journal entry (or entries) on Pam's books to account for the pooling of interests.
(Hint: Do not forget to consider the 2,000 shares of Sun held by Pam on January 1, 2000.)
PROBLEMS
P1-1
Acquisition journal entries
Phen Ltd. issued 500,000 common shares of $10 at par and paid $1,000,000 for the net assets of
Sung Ltd. on August 17, 2014. The market value of Phen Ltd.'s stocks was $20 per share at the time.
Sung Ltd. was dissolved immediately after the acquisition. The information related to Sung Ltd.'s
net assets is as follows (in thousands):
Book Value Fair Value
Cash
$2,000
$2,000
Trade receivables
800
600
3,200
1,000
6,000
Inventories
Prepaid expenses
Land
Building-net
Equipment-net
Trade payable
Notes payable
Bonds payable
Common stock, $5 par
Retained Earnings
3,000
1,000
6,800
10,100
3,000
1,500
4,600
7,100
10,000
3,500
1,300
4,300
6,600
5,300
9,000
REQUIRED: Prepare the necessary journal entries for the acquisition.
P1-2
Balance sheet after an acquisition
On December 31, Jose SA acquired Carlos SA by issuing 200,000 common shares with a par value
of $10. The market value for these common shares was $10,000,000 at the date of acquisition. Below
is the balance sheet and fair value information for Jose SA and Carlos SA immediately before the
acquisition (in thousands):
Business Combinations
47
Jose SA
Jose SA
Carlos SA
Carlos SA
(Book Value)
(Fair Value)
(Book Value)
(Fair Value)
$2,000
13,000
15,000
5,000
12,000
$2,000
20,000
20,000
S1,000
8,000
10,000
2,000
$1,000
12,000
13,000
4,000
13,000
4,000
12,000
8,000
O par
10,000
5,000
3,000
4,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2f5bc8ec-78d8-44c1-bc96-e3aa5f453202%2F1b31a9b3-becc-4f87-a792-da2466e3eed6%2F5bc6ov3_processed.jpeg&w=3840&q=75)
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