Advanced Financial Accounting
11th Edition
ISBN: 9780078025877
Author: Theodore E. Christensen, David M Cottrell, Cassy JH Budd Advanced Financial Accounting
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 1, Problem 1.14E
Bargain Purchase
Using the data resented in E1-13, determine the amount Planter Corporation would recordas a gain on bargain purchase and prepare the
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What are the related journal entries?
Acquisition Entries, Acquisition Costs, Bargain Gain
Plastic Corporation is contemplating a business combination with Steel Corporation at December 31, 2021. Steel's condensed balance sheet on that date appears below:
Assets
Cash and receivables
Inventory
Equity method investments
Land
Buildings and equipment
Patents
Total assets
Liabilities and Stockholders' Equity
Liabilities
Common stock
Retained earnings
Total liabilities and equity
Cash and receivables
Inventory
Equity method investments
Land
Description
Buildings and equipment
Patents
Goodwill
Liabilities
Required
Prepare the journal entry to record the business combination of Plastic and Steel for each of the following acquisition costs and combination methods.
(a) Plastic acquires Steel as a merger for $250,000 cash. Other direct cash acquisition costs are $20,000.
General Journal
Description
Cash and receivables
Inventory
Equity method investments.
Land
Liabilities
Cash
Buildings and equipment
Patents
÷
Description
(b) Plastic…
An entity acquired an investment in equity instrument for P800,000 on 31 March 2020. The direct acquisition costs incurred were P140,000.
On 31 December 2020 the fair value of the instrument was P1,100,000 and the transaction costs that would be incurred on sale were estimated at P120,000.
If the investment is designated as FA@FVTOCI, what gain would be recognized in the financial statements for the year ended 31 December 2020?
A. Nil
B. 40,000
C. 160,000
D. 420,000
Chapter 1 Solutions
Advanced Financial Accounting
Ch. 1 - What types of circumstances would encourage...Ch. 1 - How would the decision to dispose of a segment of...Ch. 1 - Prob. 1.3QCh. 1 - Prob. 1.4QCh. 1 - Prob. 1.5QCh. 1 - Prob. 1.6QCh. 1 - Prob. 1.8QCh. 1 - Prob. 1.9QCh. 1 - Prob. 1.10QCh. 1 - Prob. 1.11Q
Ch. 1 - Prob. 1.12QCh. 1 - Prob. 1.13QCh. 1 - Prob. 1.14QCh. 1 - Prob. 1.15QCh. 1 - Within the measurement period following a business...Ch. 1 - Prob. 1.17QCh. 1 - Prob. 1.1CCh. 1 - Prob. 1.3CCh. 1 - Prob. 1.4CCh. 1 - Risks Associated with Acquisitions Not all...Ch. 1 - Prob. 1.8CCh. 1 - Prob. 1.1.1ECh. 1 - Prob. 1.1.2ECh. 1 - Prob. 1.1.3ECh. 1 - Multiple-Choice Questions on Complex Organizations...Ch. 1 - Prob. 1.1.5ECh. 1 - Prob. 1.2.1ECh. 1 - Prob. 1.2.2ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Prob. 1.2.4ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Prob. 1.3.3ECh. 1 - Prob. 1.3.4ECh. 1 - Prob. 1.4.1ECh. 1 - Prob. 1.4.2ECh. 1 - Prob. 1.4.3ECh. 1 - Prob. 1.4.4ECh. 1 - Prob. 1.4.5ECh. 1 - Prob. 1.5ECh. 1 - Prob. 1.6ECh. 1 - Prob. 1.7ECh. 1 - Prob. 1.8ECh. 1 - Prob. 1.9ECh. 1 - Prob. 1.10ECh. 1 - Prob. 1.11ECh. 1 - Goodwill Recognition Spur Corporation reported the...Ch. 1 - Acquisition Using Debentures Planter Corporation...Ch. 1 - Bargain Purchase Using the data resented in E1-13,...Ch. 1 - Prob. 1.15ECh. 1 - Prob. 1.16ECh. 1 - Prob. 1.17ECh. 1 - Prob. 1.18ECh. 1 - Prob. 1.19ECh. 1 - Prob. 1.20ECh. 1 - Prob. 1.21ECh. 1 - Prob. 1.22ECh. 1 - Prob. 1.23ECh. 1 - Prob. 1.24PCh. 1 - Prob. 1.25PCh. 1 - Prob. 1.26PCh. 1 - Prob. 1.27PCh. 1 - Prob. 1.28PCh. 1 - Prob. 1.29PCh. 1 - Prob. 1.30PCh. 1 - Prob. 1.31PCh. 1 - Prob. 1.32PCh. 1 - Prob. 1.33PCh. 1 - Prob. 1.34PCh. 1 - Prob. 1.35PCh. 1 - Business Combination Following are the balance...Ch. 1 - Prob. 1.37PCh. 1 - Prob. 1.38PCh. 1 - Prob. 1.39PCh. 1 - Prob. 1.40P
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- An entity acquired an investment in equity instrument for P800,000 on 31 March 2020. The direct acquisition costs incurred were P140,000. On 31 December 2020 the fair value of the instrument was P1,100,000 and the transaction costs that would be incurred on sale were estimated at P120,000. If the investment is designated as FA@FVTOCI, what gain would be recognized in the financial statements for the year ended 31 December 2020?arrow_forwardPuncho Company is acquiring the net assets of Semos Company in exchange for common stock valued at $900,000. The Semos identifiable net assets have book and fair values of $400,000 and $800,000, respectively. Compare accounting for the acquisition (including assignment of the price paid) by Puncho with accounting for the sale by Semos.arrow_forwardAt what amount should the revaluation surplus be reported on December 31, 2022 in the statement of changes in equity?arrow_forward
- Topic: Gain or Loss on Sale of FVPL Question: Why Transaction was not deducted from the selling price when getting the Gain on Sale?arrow_forwardOn January 1, 2021, Jeremiah Company purchased trading equity investments which are irrevocably designated at FVPL: Security Purchase price Transaction costs Fair value, Dec. 31, 2021 A P1,000,000 P100,000 P1,500,000 B 2,000,000 200,000 2,400,000 C 4,000,000 400,000 4,700,000 On July 5, 2021, the entity sold Security C amounting to P5,200,000. Requirements: Determine the unrealized gain/loss on December 31, 2021? Determine the net gain/loss reported on the income statement on December…arrow_forward6. Tulip Company purchased the net assets of another entity for P2,000,000. On the sate of the transaction, the acquire had P800,000 of liabilities The assets of the acquiree at fair value were $1,900,000 for current assets and P1,600,000 for noncurrent assets. What is the amount of gain on bargain purchase? a. P 700,000 b. P-700,000 c. P 800,000 d. P-800,000arrow_forward
- Gg.162.arrow_forwardIf CARDO Co purchases the net assets of SYANO Co by issuing 5,000 shares of their P20 par valueshares with a fair value of P40 per share, incurs a mortgage loan for P90,000, pays P150,000 cash andpaying direct, indirect and stock issue costs of P75,000, P50,000 and P40,000 respective. REQUIREMENTS:A. GoodwillB. Consolidated Total Assets at the date of acquisitionarrow_forwardPrepare and compute for the CONSOLIDATED TOTAL LIABILITIES at the date of acquisition.arrow_forward
- Acquirer Company purchased the net asset of Acquiree Company (excluding cash) by paying P250,000 cash, issuing shares with a fair value of P1,810,000 and issuing a bond debenture with a fair value of P380,000 on January 2, 2022. The financial statements of Acquirer and Acquiree as of this date were as follows (see image below).The book value reflected the fair value of the assets and liabilities except that the inventory of Acquirer had a fair value of 1,500,000 and the inventory and equipment of Acquiree had fair values of P750,000 and P1,400,000 respectively. Acquirer also incurred the following costs: Finder’s fee – P10,000; Accountant’s fee – P15,000; Legal fees – P7,500; Printing of stock certificates – P5,000; and Audit and accountant’s fee related to stock issuance – P20,000. Acquirer only paid 50% of the said acquisition related costs. Answer the following: a. How much is the Consolidated Equity? b. How much is the Goodwill/Gain on Bargain Purchase? c. How much is the…arrow_forwardAcquirer Company purchased the net asset of Acquiree Company (excluding cash) by paying P250,000 cash, issuing shares with a fair value of P1,810,000 and issuing a bond debenture with a fair value of P380,000 on January 2, 2022. The financial statements of Acquirer and Acquiree as of this date were as follows (see image below).The book value reflected the fair value of the assets and liabilities except that the inventory of Acquirer had a fair value of 1,500,000 and the inventory and equipment of Acquiree had fair values of P750,000 and P1,400,000 respectively. Acquirer also incurred the following costs: Finder’s fee – P10,000; Accountant’s fee – P15,000; Legal fees – P7,500; Printing of stock certificates – P5,000; and Audit and accountant’s fee related to stock issuance – P20,000. Acquirer only paid 50% of the said acquisition related costs. Answer the following: a. How much is the Consolidated Equity? b. How much is the Goodwill/Gain on Bargain Purchase? c. How much is the…arrow_forwardDetermine the unrealized gain/loss on December 31, 2021?arrow_forward
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