EBK ADVANCED FINANCIAL ACCOUNTING
12th Edition
ISBN: 9781260165104
Author: Christensen
Publisher: YUZU
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Textbook Question
Chapter 10, Problem 10.7Q
What portion of the sales of an acquired company is included in the consolidated income statement following a midyear acquisition?
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Part A
Determine the amount of goodwill at the acquisition date.
Part B
Determine the following numbers from the consolidated income statement for the year ending December 31, Year 11
Sales
Dividend, investment income, and gains
Cost of goods sold
Other expenses
Income tax expense
Profit
Non-controlling interest
Part C
Calculate the consolidated retained earnings at December 31, Year 11. The consolidated retained earnings is
Part D
Determine the following numbers from the consolidated balance sheet at December 31, Year 11
Cash and current receivables
Inventories
Deferred income tax asset
Goodwill
Plant and equipment
Accumulated depreciation
Land
Current liabilities
Deferred tax liability
Long-term liabilities
Ordinary shares
Non-controlling interest
a. Determine the carrying amount of the inventory that S Company purchased from P Company in the December 31, 2019 consolidated Statement of financial position.
b. Determine the percent of noncontrolling interest ownership in S Company as of December 31, 2019.
Any inter-company gain on a downstream sale of fixed assets should be recognized in consolidated net income:
I. in the year of the downstream sale.II. over the period of time the subsidiary uses the asset.III. in the year the subsidiary sells the assets to an unrelated party.
Group of answer choices
I.
II.
III.
I and II
Chapter 10 Solutions
EBK ADVANCED FINANCIAL ACCOUNTING
Ch. 10 - Prob. 10.1QCh. 10 - Why are dividend payments to noncontrolling...Ch. 10 - Prob. 10.3QCh. 10 - Why are changes in inventory balances not shown in...Ch. 10 - Prob. 10.5QCh. 10 - How is an increase in inventory included in the...Ch. 10 - What portion of the sales of an acquired company...Ch. 10 - Prob. 10.8QCh. 10 - Prob. 10.9QCh. 10 - Prob. 10.10Q
Ch. 10 - Prob. 10.11QCh. 10 - Prob. 10.12QCh. 10 - Prob. 10.13QCh. 10 - Prob. 10.14QCh. 10 - How do interperiod income tax allocation...Ch. 10 - How does the use of interperiod tax allocation...Ch. 10 - Prob. 10.17QCh. 10 - Prob. 10.18QCh. 10 - Prob. 10.19QCh. 10 - When a subsidiary’s convertible bond is treated as...Ch. 10 - Prob. 10.21QCh. 10 - What effect does the presence of a noncontrolling...Ch. 10 - Prob. 10.3CCh. 10 - Consolidated Cash Flows Analysis The consolidated...Ch. 10 - Prob. 10.1ECh. 10 - Prob. 10.2ECh. 10 - Prob. 10.3ECh. 10 - Prob. 10.4ECh. 10 - Prob. 10.5ECh. 10 - Direct Method Cash Flow Statement Using the data...Ch. 10 - Prob. 10.7ECh. 10 - Prob. 10.8ECh. 10 - Prob. 10.9ECh. 10 - Prob. 10.10ECh. 10 - Prob. 10.11ECh. 10 - Prob. 10.12ECh. 10 - Prob. 10.13ECh. 10 - Prob. 10.14ECh. 10 - Effect of Convertible Bonds on Earnings per Share...Ch. 10 - Effect of Convertible Preferred Stock on Earnings...Ch. 10 - Prob. 10.17PCh. 10 - Prob. 10.18PCh. 10 - Preparing a Statement of Cash Flows—Direct Method...Ch. 10 - Prob. 10.20PCh. 10 - Prob. 10.21PCh. 10 - Prob. 10.22PCh. 10 - Prob. 10.23PCh. 10 - Prob. 10.24PCh. 10 - Prob. 10.25PCh. 10 - Prob. 10.26PCh. 10 - Prob. 10.27PCh. 10 - Prob. 10.28PCh. 10 - Prob. 10.29PCh. 10 - Prob. 10.30PCh. 10 - Prob. 10.31PCh. 10 - Prob. 10.32PCh. 10 - Prob. 10.33P
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- Determine the carrying amount of the inventory that S Company purchased from P Company in the December 31, 2019 consolidated Statement of financial position.arrow_forwardA business combination resulting to a goodwill is accounted using acquisition method. In the consolidated balance sheet at the date of acquisition, which of the following statement about retained earnings (RE) is TRUE? A. RE is equal to RE of the acquirer plus unadjusted net income of the acquiree. B. RE is equal to RE of the acquirer only. C. RE is equal to the sum of the RE of the acquirer and acquiree. D. RE is equal to RE of the acquirer plus adjusted income of subsidiary net of minority interest in subsidiary’s net income.arrow_forwardIn a mid-year purchase when the subsidiary’s books are not closed until the end of the year, the purchase income account contains the parent’s share of theA. Subsidiary’s income earned from the beginning of the year to the date of acquisition.B. Subsidiary’s income earned from the date of acquisition to the end of the year.C. Consolidated net income.D. Subsidiary’s income earned for the entire yeararrow_forward
- In a mid-year purchase when the subsidiary's books are not closed until the end of the year, the consolidated net income contains the parent's share of the a. subsidiary's income earned for the entire year. b. subsidiary's income earned from the beginning of the year to the date of acquisition. c. subsidiary's income earned from the date of acquisition to the end of the year. d. dividends received from the subsidiary during the period of ownership.arrow_forwardA business combination resulting to a goodwill is accounted using acquisition method. In the consolidated balance sheet at the date of acquisition, which of the following statement about retained earnings (RE) is TRUE? O RE is equal to RE of the acquirer only. O RE is equal to the sum of the RE of the acquirer and acquire. O RE is equal to RE of the acquirer plus unadjusted net income of the acquire. RE is equal to RE of the acquirer plus adjusted income of subsidiary net of minority interest in subsidiary's net income.arrow_forwarda. Using the information provided in the image below, determine the carrying amount of the inventory that S Company purchased from P Company in the December 31, 2019 consolidated Statement of financial position b. Using the same information in item 2, determine the percent of noncontrolling interest ownership in S Company as of December 31, 2019.arrow_forward
- In the years subsequent to the year of sale of a 90% owned subsidiary who sells equipment to its parent company at a gain, the non-controlling interest in consolidated income is computed by multiplying the non-controlling interest percentage by the subsidiary’s reported income: A. After adding intercompany gain considered realized in that period. B. After adding the intercompany gain on sales C. After deducting the intercompany gain on sales D. After deducting intercompany gain considered realized in that period.arrow_forwarda) The amount of the adjustment to the non-controlling interest in consolidated net assets is equal to the non-controlling interest’s percentage of the A. Realized intercompany gain at the end of the period. B. Unrealized intercompany gain at the beginning of the period C. Realized intercompany gain at the beginning of the period D. Unrealized intercompany gain at the end of the period b) In years subsequent to the upstream intercompany sale of non-depreciable assets, the necessary consolidated workpaper entry is debit to the A. Non-controlling interest and retained earnings (parent) accounts, and credit to the non-depreciable asset B. No entries are necessary C. Non-depreciable asset and credit to non-controlling interest and Investment in Subsidiary account. D. Retained Earnings (parent) account and credit to non-depreciable asset.arrow_forwardStatement I: In a business combination achieved in stages, the resulting gain or loss from the remeasurement of the acquirer’s previously held equity interest to its acquisition-date fair values shall be recognize in profit or loss or other comprehensive income.Statement II: The measurement period shall not exceed one year from the acquisition date. a. True, False b. False, False c. True, True d. False, Truearrow_forward
- P Ltd bought 80% of S Ltd’s equity shares on 1 January 2016. On the date of the purchase of S Ltd's shares, among other things, S Ltd's statement of financial position contains the following: $ Retained profit 72,000 Tangible non-current assets Cost 288,000 Fair value 360,000 On the date of acquisition (of S Ltd's shares) by P Ltd, S Ltd's assets were not revalued to fair value. It is part of S Ltd's accounting policy to depreciate non-current assets on a straight-line basis for 10 years. The income statements of P Ltd and S Ltd for the year ended 31 December 2020 are as follows: P Ltd S Ltd $ $ Revenue 240,000 168,000 Cost of sales 144,000 24,000 Gross profit 96,000 144,000 Expenses 12,000 14,400 Depreciation and amortization Operating profit 24,000 28,800 60,000 100,800 9,600 50,400 Income tax 2,400 Net profit 98,400 Reserves (brought forward) Reserves (carried forward) 240,000 168,000 290,400 266,400 Note: P Ltd and S Ltd are considered to be in the same group for the purpose of…arrow_forwardYou are required to prepare the consolidated statement of financial position as at 31 December x7. Assume: i. Non-controlling interest is measured based on the net assets of the investee on the acquisition date. il. Non-controlling interest is measured based on its fair value.arrow_forwardA business combination resulting to a goodwill is accounted using acquisition method. In the consolidated balance sheet at the date of acquisition, which of the following statement about retained earnings (RE) is TRUE? Group of answer choices RE is equal to the sum of the RE of the acquirer and acquire. RE is equal to RE of the acquirer plus unadjusted net income of the acquire. RE is equal to RE of the acquirer plus adjusted income of subsidiary net of minority interest in subsidiary’s net income. RE is equal to RE of the acquirer only.arrow_forward
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