EBK ADVANCED FINANCIAL ACCOUNTING
11th Edition
ISBN: 8220102796096
Author: Christensen
Publisher: YUZU
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Chapter 1, Problem 1.27P
To determine
Introduction: Acquisition of shares is a process by which controlling interest in a company could be attained by purchasing majority shares of the company. In this process, shares acquired are recorded as investments in the books of the acquiring company.
To prepare:
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Puzzle Corporation acquired 100 percent of the common stock of Solver Company by issuing 10,000 shares of $10 par common stock with a market value of $60 per share. Summarized balance sheet data for the two companies immediately preceding the acquisition are as follows:
Puzzle Corporation
Solver Corporation
Book Value
Fair Value
Book Value
Fair Value
Total Assets
$ 1,200,000
$ 1,500,000
$ 900,000
$ 1,300,000
Total Liabilities
$ 800,000
$ 700,000
$ 600,000
$ 750,000
Total Stockholders Equity
400,000
300,000
$ 1,200,000
$ 900,000
Required:
Determine the dollar amounts to be presented in the consolidated balance sheet for (1) total assets, (2) total liabilities, and (3) total stockholders' equity.
Phone Corporation acquired 70 percent of Smart Corporation’s common stock on December 31, 20X4, for $98,000. At that date, the fair value of the noncontrolling interest was $42,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:
Item
Phone Corporation
Smart Corporation
Cash
$ 52,300
$ 39,000
Accounts Receivable
99,000
59,000
Inventory
136,000
92,000
Land
66,000
49,000
Buildings & Equipment
417,000
268,000
Less: Accumulated Depreciation
(151,000)
(73,000)
Investment in Smart Corporation
98,000
Total Assets
$ 717,300
$ 434,000
Accounts Payable
$ 141,500
$ 27,000
Mortgage Payable
300,800
288,000
Common Stock
72,000
40,000
Retained Earnings
203,000
79,000
Total Liabilities & Stockholders’ Equity
$ 717,300
$ 434,000
At the date of the business combination, the book values of Smart’s assets and liabilities approximated fair value except for inventory, which had a fair value of…
Phone Corporation acquired 70 percent of Smart Corporation’s common stock on December 31, 20X4, for $98,000. At that date, the fair value of the noncontrolling interest was $42,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:
Item
Phone Corporation
Smart Corporation
Cash
$ 52,300
$ 39,000
Accounts Receivable
99,000
59,000
Inventory
136,000
92,000
Land
66,000
49,000
Buildings & Equipment
417,000
268,000
Less: Accumulated Depreciation
(151,000)
(73,000)
Investment in Smart Corporation
98,000
Total Assets
$ 717,300
$ 434,000
Accounts Payable
$ 141,500
$ 27,000
Mortgage Payable
300,800
288,000
Common Stock
72,000
40,000
Retained Earnings
203,000
79,000
Total Liabilities & Stockholders’ Equity
$ 717,300
$ 434,000
At the date of the business combination, the book values of Smart’s assets and liabilities approximated fair value except for inventory, which had a fair value of…
Chapter 1 Solutions
EBK 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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- Power Corporation acquired 70 percent of Silk Corporation’s common stock on December 31, 20x2. Balance sheet datafor the two companies immediately following acquisition follow 4. What amount of investment in Silk will be reported?A. P 0 C. P 150,500B. P 140,000 D. P 215,0005. What amount of liabilities will be reported?A. P265,000 C. P 622,000B. P 436,500 D. P 701,5006. What amount will be reported as non-controlling interest?A. P 42,000 C. P 60,900B. P 52,500 D. P 64,500arrow_forwardStep Acquisition: Press Company acquires 15 percent of Secretary Company's common stock for P600,000 cash and carries the investment using the cost model. A few months later, Press purchases another 60 percent of Secretary Company's stock for P2,592,000. At that date, Secretary Company reports identifiable assets with a book value of P4,680,000 and a fair value of P6,120,000, and it has liabilities with a book value and fair value of P2,280,000. The fair value of the 25% non-controlling interest in Secretary Company is P1,080,000.Determine the following (at full fair value)GoodwillNon-Controlling Interest (NCI)arrow_forwardX Company purchased a (100%) controlling interest in Y Company by issuing $2,000,000 worth of common shares. The business combination agreement has an earnout clause that states the following: X Company would pay 10% of any earnings in excess of $750,000 to Y's shareholders in the first year following the acquisition. On acquisition date, X's shares had a market value of $80 per share.Required:a) Assuming that Y's net income in the first year following the acquisition was $950,000, prepare any journal entries (for X Company) that are necessary to reflect Y's results under IFRS 3 Business Combinations.b) Assuming that the agreement called for Y's shareholders to be compensated with 1,250 shares for any decline in X's share price, what journal entries would be required under IFRS 3, if the market value of X's shares dropped to $64 within the year?arrow_forward
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