Sandstone Corporation has the following account balances and respective fair values on June 30: Book Values $ 81,500 Fair Values $ 81,500 196,000 676,000 196,000 532,000 (462,000) Items Receivables Patented technology Computer software In-process research and development Liabilities Common stock Additional paid-in capital Retained earnings deficit, 1/1 Revenues Expenses 0 0 (462,000) (100,000) (300,000) 671,700 (336,000) 248,800 0 0 0 0 0 Patriot, Incorporated, obtained all of the outstanding shares of Sandstone on June 30 by issuing 20,000 shares of common stock having a $1 par value but a $70 fair value. Patriot incurred $10,000 in stock issuance costs and paid $70,000 to an investment bank firm for its assistance in arranging the combination. In negotiating the final terms of the deal, Patriot also agrees to pay $95,000 to Sandstone's former owners if it achieves certain revenue goals in the next two years. Patriot estimates the probability adjusted pres value of this contingent performance obligation at $28,500. Required: a. What is the fair value of the consideration transferred in this combination? b. How should the stock issuance costs appear in Patriot's postcombination financial statements? c. How should Patriot account for the fee paid to the investment bank? d. How does the issuance of these shares affect the stockholders' equity accounts of Patriot, the parent? e. How is the fair value of the consideration transferred in the combination allocated among the assets acquired and the liabilities assumed? h. If Patriot's stock had been worth only $45 per share rather than $70, how would the consolidation of Sandstone's assets and liabilities have been affected?
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.
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