Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 2, Problem 2.3.1P
To determine
Introduction: Purchasing 100% interest in Entro Corporation means Carlson Enterprises purchased 100% control over it and it is a case of wholly owned subsidiary.
To record: Investment in Entro Corporation
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
On March 1, 2015, Penson Enterprises purchases an 80% interest in Express Corporation for $320,000 cash. Express Corporation has the following balance sheet on February 28, 2015: (attached)Penson Enterprises receives an independent appraisal on the fair values of Express Corporation’s assets and liabilities. The controller has reviewed the following figures and accepts them as reasonable:Accounts receivable . . . . . . . . . . $ 60,000Inventory . . . . . . . . . . . . . . . . . . . 100,000Land. . . . . . . . . . . . . . . . . . . . . . . 50,000Buildings . . . . . . . . . . . . . . . . . . . 200,000Equipment . . . . . . . . . . . . . . . . . . 162,000Current liabilities . . . . . . . . . . . . . 50,000Bonds payable . . . . . . . . . . . . . . 95,0001. Record the investment in Express Corporation.2. Prepare the value analysis schedule and the determination and distribution of excess schedule.3. Prepare the elimination entries that would be made on a consolidated worksheet prepared on the…
Use the following to answer questions 8 through 10:
On May 1, 2021, Jazzie Co. agreed to sell the assets of its Mister Division to Shawna Inc. for $80 million. The sale was completed on December 31, 2021. Jazzie’s year ends on December 31st. The following additional facts pertain to the transaction:
The Mister Division qualifies as a component of an entity as defined by GAAP.
Mister's net assets totaled $48 million on Jazzie's books at the time of the sale.
Mister incurred a pre-tax operating loss of $10 million in 2021.
Jazzie’s income tax rate is 40%.
In the 2021 income statement for Jazzie Co., they would report after tax income from discontinued operations of:
Group of answer choices
$9.2 million.
$13.2 million.
$22 million.
$26 million.
On May 28, 2018, Pesky Corporation acquired all of the outstanding common stock of Harman, Inc. for$420 million. The fair value of Harman’s identifiable tangible and intangible assets totaled $512 million, and thefair value of liabilities assumed by Pesky was $150 million.Pesky performed a goodwill impairment test at the end of its fiscal year ended December 31, 2018. Management has provided the following information:Fair value of Harman, Inc. $400 millionFair value of Harman’s net assets (excluding goodwill) 370 millionBook value of Harman’s net assets (including goodwill) 410 millionRequired:1. Determine the amount of goodwill that resulted from the Harman acquisition.2. Determine the amount of goodwill impairment loss that Pesky should recognize at the end of 2018, if any.3. If an impairment loss is required, prepare the journal entry to record the loss.
Chapter 2 Solutions
Advanced Accounting
Ch. 2 - Prob. 1UTICh. 2 - Prob. 2UTICh. 2 - Prob. 3UTICh. 2 - Prob. 4UTICh. 2 - Prob. 5UTICh. 2 - Prob. 6UTICh. 2 - Santos Corporation is considering investing in...Ch. 2 - Prob. 2.1ECh. 2 - Prob. 2.2ECh. 2 - Prob. 3.1E
Ch. 2 - Prob. 3.2ECh. 2 - Prob. 4.1ECh. 2 - Prob. 4.2ECh. 2 - Prob. 4.3ECh. 2 - Prob. 5.1ECh. 2 - Prob. 5.2ECh. 2 - Prob. 6.1ECh. 2 - Prob. 6.2ECh. 2 - Prob. 7.1ECh. 2 - Prob. 7.2ECh. 2 - Prob. 8.1ECh. 2 - Prob. 9.1ECh. 2 - Prob. 9.2ECh. 2 - Prob. 9.4ECh. 2 - Prob. 2A.1AECh. 2 - Prob. 2.1.1PCh. 2 - Prob. 2.1.2PCh. 2 - Prob. 2.2.1PCh. 2 - Prob. 2.2.2PCh. 2 - Prob. 2.2.3PCh. 2 - Prob. 2.3.1PCh. 2 - Prob. 2.3.2PCh. 2 - Prob. 2.3.3PCh. 2 - Prob. 2.4.1PCh. 2 - Prob. 2.4.2PCh. 2 - Prob. 2.4.3PCh. 2 - Prob. 2.5.1PCh. 2 - Prob. 2.5.2PCh. 2 - Prob. 2.5.3PCh. 2 - Prob. 2.6.1PCh. 2 - Prob. 2.6.2PCh. 2 - Prob. 2.7.1PCh. 2 - Prob. 2.7.2PCh. 2 - Prob. 2.8.1PCh. 2 - Prob. 2.8.2PCh. 2 - Prob. 2.9.1PCh. 2 - Prob. 2.9.2PCh. 2 - Prob. 2.10.1PCh. 2 - Prob. 2.11.1PCh. 2 - Prob. 2.12.1PCh. 2 - Prob. 2.12.2PCh. 2 - Prob. 2.13.1PCh. 2 - Prob. 2.13.2PCh. 2 - Prob. 2.14.1PCh. 2 - Prob. 2.14.2PCh. 2 - Prob. 2.15.1PCh. 2 - Prob. 2.15.2PCh. 2 - Prob. 2A.1.1APCh. 2 - Prob. 2A.1.2APCh. 2 - Prob. 2.1.1CCh. 2 - Prob. 2.1.2C
Knowledge Booster
Similar questions
- Your client, Lewison International, has informed you that it has reached an agreement with Herro Company to acquire all of Herro’s assets. This transaction will be accomplished through the issue of Lewison’s common stock. After your examination of the financial statements and the acquisition agreement, you have discovered the following important facts. The Lewison common stock issued has a fair value of $800,000. The fair value of Herro’s assets, net of all liabilities, is $700,000. All asset book values equal their fair values except for one machine valued at $200,000. This machine was originally purchased two years ago by Herro for $180,000. This machine has been depreciated using the straight-line method with an assumed useful life of 10 years and no salvage value. The acquisition is to be considered a taxfree exchange for tax purposes. Assuming a 30% tax rate, what amounts will be recorded for the machine, deferred tax liability, and goodwill?arrow_forwardSky Ltd acquired all the issued shares of Jupiter Ltd on 1 January 2019. The following transactions occurred between the two entities: • On 1 June 2020, Sky Ltd sold inventory to Jupiter Ltd for $12 000; By 30 June 2020, Jupiter Ltd had sold 20% of this inventory to other entities for $3000. The other 80% was all sold to external entities by 30 June 2021 for $13 000. • During the 2020–21 period, Jupiter Ltd sold inventory to Sky Ltd for $6000 at cost plus 20% markup. Of this inventory, 20% remained on hand in Sky Ltd at 30 June 2021. The tax rate is 30%. Required: a) Prepare the consolidation worksheet entries for Sky Ltd at 30 June 2021 concerning the intragroup inventory transfers. b) Compute the cost of goods sold to be reported in the consolidated income statement for 2021 relating to this intra-group sale. Please avoid solutions in an image based thankuarrow_forwardOn December 31, 2017, PanTech Company invests $20,000 in SoftPlus, a variable interest entity. In contractual agreements completed on that date, PanTech established itself as the primary beneficiary of SoftPlus. Previously, PanTech had no equity interest in SoftPlus. Immediately after PanTech’s investment, SoftPlus presents the following balance sheet:Each of the above amounts represents an assessed fair value at December 31, 2017, except for the marketing software. Accordingly the December 31 fair value of SoftPlus is assessed at $80,000.a. If the marketing software was undervalued by $20,000, what amounts for SoftPlus would appear in PanTech’s December 31, 2017, consolidated financial statements?b. If the marketing software was overvalued by $20,000, what amounts for SoftPlus would appear in PanTech’s December 31, 2017, consolidated financial statements?arrow_forward
- On January 1, 2024, Hokie Company paid $200,000 to purchase 25% of Cavalier Company. This investment allowed Hokie Company to hold significant influence over Cavalier's operations. Cavalier reported total 2024 net income of $40,000, other comprehensive income of $3,000, and dividends of $8,000. The fair value of Hokie's investment in Cavalier Company at 12/31/2024 was $220,000. Based on the above information, use the dropdown lists to answer the following questions: 1. The investment balance at 12/31/2024 is: $212,750 2. The equity income balance on the income statement for the year ended 12/31/2024 is: $10,000 3. The equity income balance in other comprehensive income for the year ended 12/31/2024 is: 750arrow_forwardOn May 1, 2021, Jazzie Co. agreed to sell the assets of its Mister Division to Shawna Inc. for $80 million. The sale was completed on December 31, 2021. Jazzie’s year ends on December 31st. The following additional facts pertain to the transaction: The Mister Division qualifies as a component of an entity as defined by GAAP. Mister's net assets totaled $48 million on Jazzie's books at the time of the sale. Mister incurred a pre-tax operating loss of $10 million in 2021. Jazzie’s income tax rate is 40%. Suppose that the Mister Division's assets had not been sold by December 31, 2021, but were considered held for sale. Assume that the fair value of these assets at December 31 was $40 million. In their 2021 income statement, Jazzie Co. would report for discontinued operations: Group of answer choices a $6 million after tax loss. a $10 million after tax loss. a $10.8 million after tax loss. an $18 million after tax loss.arrow_forwardBorn Corporation agrees to acquire the net assets ofWren Corporation on January 1, 2015.Wren has the following balance sheet on the date of acquisition:An appraiser determines that in-process R&D exists and has an estimated value of $20,000. The appraisal indicates that the following assets have fair values that differ from their book values: Fair ValueInventory . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,000Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 340,000Trademark . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000Use value analysis to prepare the entry on the books of Born Corporation to acquire the net assets ofWren Corporation under each of the following purchase price scenarios:1. Purchase price is $540,000.2. Purchase price is $350,000.arrow_forward
- On May 1, 2021, Jazzie Co. agreed to sell the assets of its Mister Division to Shawna Inc. for $80 million. The sale was completed on December 31, 2021. Jazzie’s year ends on December 31st. The following additional facts pertain to the transaction: The Mister Division qualifies as a component of an entity as defined by GAAP. Mister's net assets totaled $48 million on Jazzie's books at the time of the sale. Mister incurred a pre-tax operating loss of $10 million in 2021. Jazzie’s income tax rate is 40%. Suppose that the Mister Division's assets had not been sold by December 31, 2021, but were considered held for sale. Assume that the fair value of these assets at December 31 was $80 million. In their 2021 income statement, Jazzie Co. would report for discontinued operations: Group of answer choices a $6 million after tax loss. a $10 million after tax loss after tax income of $13.2 million. after tax income of $22 million.arrow_forwardSky Ltd acquired all the issued shares of Jupiter Ltd on 1 January 2019. The following transactions occurred between the two entities: • On 1 June 2020, Sky Ltd sold inventory to Jupiter Ltd for $12 000; By 30 June 2020, Jupiter Ltd had sold 20% of this inventory to other entities for $3000. The other 80% was all sold to external entities by 30 June 2021 for $13 000. . During the 2020-21 period, Jupiter Ltd sold inventory to Sky Ltd for $6000 at cost plus 20% markup. Of this inventory, 20% remained on hand in Sky Ltd at 30 June 2021. The tax rate is 30%. Required: Prepare the consolidation worksheet entries for Sky Ltd at 30 June 2021 concerning the intragroup inventory transfers.arrow_forwardEcho, Inc., purchased 10 percent of ProForm Corporation on January 1, 2017, for $345,000 and accounted for the investment using the fair-value method. Echo acquires an additional 15 percent of ProForm on January 1, 2018, for $580,000. The equity method of accounting is now appropriate for this investment. No intra-entity sales have occurred.a. How does Echo initially determine the income to be reported in 2017 in connection with its ownership of ProForm?b. What factors should have influenced Echo in its decision to apply the equity method in 2018?c. What factors could have prevented Echo from adopting the equity method after this second purchase?d. What is the objective of the equity method of accounting?e. What criticisms have been leveled at the equity method? f. In comparative statements for 2017 and 2018, how would Echo determine the income to be reported in 2017 in connection with its ownership of ProForm? Why is this accounting appropriate?g.…arrow_forward
- Shak Company acquired a financial instrument for P4,000,000 on March 31, 2020. The financial instrument is classified as financial asset at fair value through other comprehensive income. The direct acquisition cost incurred amounted to P700,000. On December 31, 2020, the fair value of the instrument was P5,500,000 and the transaction costs that would be incurred on the sale of the investment are estimated at P600,000. What gain should be recognized in statement of financial position for the year ended December 31, 20207 Select the correct response 900,000 200,000 800,000arrow_forwardSienna Company developed a specialized banking application software program that it licenses to various financial institutions through multiple-year agreements. On January 1, 2021, these licensing agreements have a fair value of $857,500 and represent Sienna's sole asset. Although Sienna currently has no liabilities, the company has a $199,000 net operating loss (NOL) carry-forward because of recent operating losses. On January 1, 2021, Paoli, Inc., acquired all of Sienna's voting stock for $1,070,000. Paoli expects to extract operating synergies by integrating Sienna's software into its own products. Paoli also hopes that Sienna will be able to receive a future tax reduction from its NOL. Assume an applicable federal income tax rate of 21 percent. If there is a greater than 50 percent chance that the subsidiary will be able to utilize the NOL carry-forward, how much goodwill should Paoli recognize from the acquisition? If there is a less than 50 percent chance that the…arrow_forwardSienna Company developed a specialized banking application software program that it licenses to various financial institutions through multiple-year agreements. On January 1, 2021, these licensing agreements have a fair value of $905,000 and represent Sienna's sole asset. Although Sienna currently has no liabilities, the company has a $188,000 net operating loss (NOL) carry-forward because of recent operating losses. On January 1, 2021, Paoli, Inc., acquired all of Sienna's voting stock for $1,130,000. Paoli expects to extract operating synergies by integrating Sienna's software into its own products. Paoli also hopes that Sienna will be able to receive a future tax reduction from its NOL. Assume an applicable federal income tax rate of 21 percent. a. If there is a greater than 50 percent chance that the subsidiary will be able to utilize the NOL carry-forward, how much goodwill should Paoli recognize from the acquisition? b. If there is a less than 50 percent chance that the…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
