Advanced Accounting
Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
Question
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Chapter 2, Problem 2.1.2C
To determine

Business combination:

Business combination refers to the combining of one or more business organizations in a single entity. The business combination leads to the formation of combined financial statements. After business combination, the entities having separate control merges into one having control over all the assets and liabilities. Merging and acquisition are types of business combinations.

Push-down accounting:

It refers to process about subsidiary’s recording of the fair-value allocations as well as subsequent amortization in its books of accounts.

The fair value of the asset:

The fair value of the asset is the amount at which two parties may enter into an agreement with an open hand.

:

Identify the accounting methods which would be recommended if the deals are completed.

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Mary carries on business as a sole proprietor that generated $100,000 in net accounting income. Included in this amount are: • $7,000 of amortization expense; • $4,000 for bad debt expense; • $112,000 cost of goods sold; and • $12,000 meals and entertainment with clients.   Mary's maximum CCA has been calculated at $10,000 for the year. What is Mary's business income for income tax purposes? A.      $113,000 B.      $109,000 C.       $107,000 D.      $103,000
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