Concept explainers
a
Consolidation income tax issues:The legal structure of an acquisition can result in taxable or non-taxable transactions. In taxable transaction, the assets acquired and liabilities assumed will have tax basis equal to the fair market values because the subsidiary is required to recognize all inherent gains and losses for tax purposes. In order to avoid this, many acquisitions are structured to avoid classification as taxable transaction.
Any difference arising out of fair market value and tax basis should be recorded as
When companies in the consolidated group files separate tax returns, intercompany income accruals and dividend transfers must be considered in computing income tax expense for the period. When an investor and investee files separate tax returns, the investor is taxed on the dividends received from the investee rather than on the amount of investment income reported.
the complete a consolidated
b
Consolidation income tax issues: The legal structure of an acquisition can result in taxable or non-taxable transactions. In taxable transaction, the assets acquired and liabilities assumed will have tax basis equal to the fair market values because the subsidiary is required to recognize all inherent gains and losses for tax purposes. In order to avoid this, many acquisitions are structured to avoid classification as taxable transaction.
Any difference arising out of fair market value and tax basis should be recorded as
When companies in the consolidated group files separate tax returns, intercompany income accruals and dividend transfers must be considered in computing income tax expense for the period. When an investor and investee files separate tax returns, the investor is taxed on the dividends received from the investee rather than on the amount of investment income reported.
the preparation of consolidated balance sheet as of December 31, 20X9.
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Chapter 10 Solutions
ADVANCED FIN. ACCT. LL W/ACCESS>CUSTOM<
- 1.The Consolidated Retained Earnings, December 31, 20x4.2. The Consolidated sales for 20x4.3. The Consolidated cost of sales for 20x4.arrow_forwardDetermine the consolidated non controlling interest in net income in the year 20x6arrow_forwardABC Company acquired 85% of DEF Company on April 1. On its December 31, consolidated income statement, how should ABC account for DEF Company’s revenues and expenses that occurred before April 1A. Include 100% of DEF’s revenues and expenses and deduct the pre-acquisition portion as non-controlling interest in net income.B. Deduct 15% of the net combined revenues and expenses relating to the pre-acquisition period from consolidated net income.C. Exclude 100% of the pre-acquisition revenues and 100% of the pre-acquisition expensesD. Exclude 15% of the pre-acquisition revenues and 15% of the pre-acquisition expenses from consolidated expenses.arrow_forward
- SOLUTION IN GOOD ACCOUNTING FORM In the December 31, year 1 consolidated balance sheet, noncontrolling interest should be reported atarrow_forward2) On January 1, 20X5, Peery Company acquired 100 percent of Standard Company's common shares at underlying book value. Peery uses the equity method in accounting for its ownership of Standard. On December 31, 20X5, the trial balances of the two companies are as follows: Item Current Assets Depreciable Assets Investment in Standard Company Other Expenses Depreciation Expense Dividends Declared Accumulated Depreciation Current Liabilities Long-Term Debt Common Stock Retained Earnings Sales Income from Standard Company Peery Company Debit $ 238,000 300,000 100,000 90,000 30,000 32,000 Credit $ 120,000 50,000 120,000 100,000 175,000 200,000 25,000 Standard Company Debit Credit $ 95,000 170,000 70,000 17,000 10,000 $ 790,000 $ 790,000 $362,000 $ 85,000 30,000 50,000 50,000 35,000 112,000 $362,000 Required: 1. Prepare the consolidation entries needed as of December 31, 20X5, to complete a consolidation worksheet. 2. Prepare a three-part consolidation worksheet as of December 31, 20X5.arrow_forwardSolution in good accounting formarrow_forward
- Considering the intercompany transactions, compute for the consolidated net income.arrow_forwardThe Profit attributable to equity holders of parent (Parent’s Interests/Controlling Interest in Profit) for 20x1, considering intercompany transactions.arrow_forwardOn 1 January 20XO Alpha Co purchased 90,000 ordinary $1 shares in Beta Co for $270,000. At that date Beta Co's retained earnings amounted to $90,000 and the fair values of Beta Co's assets at acquisition were equal to their book values. Three years later, on 31 December 20X2, the statements of financial position of the two companies were: Alpha Co Beta Co Sundry net assets Shares in Beta 230,000 180,000 410,000 260,000 260,000 Share capital Ordinary shares of $1 each Retained earnings 200,000 100,000 210,000 410,000 160,000 260,000 The share capital of Beta Co has remained unchanged since 1 January 20X0. The fair value of the non- controlling interest at acquisition was $42,000. Required: a. What amount should appear in the group's consolidated statement of financial position at 31 December 20X2 for goodwill? b. What amount should appear in the group's consolidated statement of financial position at 31 December 20X2 for non-controlling interest? c. What amount should appear in the…arrow_forward
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