Advanced Accounting (Looseleaf)
12th Edition
ISBN: 9780077632595
Author: Hoyle
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 2, Problem 34AP
On February 1, Piscina Corporation completed a combination with Swimwear Company. At that date, Swimwear’s account balances were as follows:
| Book Values | Fair Values | |
| Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $ 600,000 | $ 650,000 |
| Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 450,000 | 750,000 |
| Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 900,000 | 1,000,000 |
| Unpatented technology . . . . . . . . . . . . . . . . . . . . . . . . . . | –0– | 1,500,000 |
| Common stock ($10 par value) . . . . . . . . . . . . . . . . . . . . | (750,000) | |
| (1,100,000) | ||
| Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (600,000) | |
| Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 500,000 |
Piscina issued 30,000 shares of its common stock with a par value of $25 and a fair value of $150 per share to the owners of Swimwear for all of their Swimwear shares. Upon completion of the combination, Swimwear Company was formally dissolved.
Prior to 2002, business combinations were accounted for using either purchase or pooling of interests accounting. The two methods often produced substantially different financial statement effects. For the scenario above,
- a. What are the respective consolidated values for Swimwear’s assets under the pooling method and the purchase method?
- b. Under each of the following methods, how would Piscina account for Swimwear’s current year, but prior to acquisition, revenues and expenses?
- Pooling of interests method.
- Purchase method.
- c. Explain the alternative impact of pooling versus purchase accounting on performance ratios such as return on assets and earnings per share in periods subsequent to the combination.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Following are data from the statements of two companies selling comparable products:Current Year-End Balance Sheets Nike Zing Company CompanyCash............................................................................................. 119.00 180.00Notes receivable ........................................................................... 77.00 32.00Accounts receivable, net ............................................................... 420.00 640.00Merchandise inventory ................................................................. 588.00 877.00Prepaid expenses .......................................................................... 16.00 55.00Plant and…
Following are data from the statements of two companies selling comparable products:
Current Year-End Balance Sheets
SunCompany
ZengCompany
Cash.........................................................................................
119.00
180.00
Notes receivable.......................................................................
77.00
32.00
Accounts receivable, net...........................................................
420.00
640.00
Merchandise inventory..............................................................
588.00
877.00
Prepaid expenses......................................................................
16.00
55.00
Plant and equipment, net...........................................................
2,321.00
2,744.00
Total assets...............................................................................…
On May 1, Soriano Co. reported the following account balances along with their estimated fair values:
Carrying Amount Fair Value
Receivables . . . . . . . . . . . . . . . . . . . . . . . $ 90,000 $ 90,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000 75,000
Copyrights . . . . . . . . . . . . . . . . . . . . . . . . 125,000 480,000
Patented technology . . . . . . . . . . . . . . . 825,000 700,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . $1,115,000 $1,345,000
Current liabilities . . . . . . . . . . . . . . . . . . . $ 160,000 $ 160,000
Long-term liabilities . . . . . . . . . . . . . . . . 645,000 635,000
Common stock . . . . . . . . . . . . . . . . . . . . 100,000
Retained earnings . . . . . . . . . . . . . . . . . . 210,000
Total liabilities and equities . . . . . . . . . . $1,115,000
On that day, Zambrano paid cash to acquire all of the assets and liabilities of Soriano, which will cease to exist as a separate entity. To facilitate the…
Chapter 2 Solutions
Advanced Accounting (Looseleaf)
Ch. 2 - Prob. 1QCh. 2 - Prob. 2QCh. 2 - What does the term consolidated financial...Ch. 2 - Within the consolidation process, what is the...Ch. 2 - Prob. 5QCh. 2 - Prob. 6QCh. 2 - Prob. 7QCh. 2 - Prob. 8QCh. 2 - Prob. 9QCh. 2 - Prob. 10Q
Ch. 2 - Prob. 11QCh. 2 - 1. Which of the following does not represent a...Ch. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - An acquired entity has a long-term operating lease...Ch. 2 - When does gain recognition accompany a business...Ch. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10PCh. 2 - On June 1, Cline Co. paid 800,000 cash for all of...Ch. 2 - On May 1, Donovan Company reported the following...Ch. 2 - Prob. 13PCh. 2 - Prob. 14PCh. 2 - Prob. 15PCh. 2 - Prob. 16PCh. 2 - On its acquisition-date consolidated balance...Ch. 2 - On its acquisition-date consolidated balance...Ch. 2 - Prob. 19PCh. 2 - The following book and fair values were available...Ch. 2 - Prob. 21PCh. 2 - Prob. 22PCh. 2 - Prob. 23PCh. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - Prob. 26PCh. 2 - Prob. 27PCh. 2 - Prob. 28PCh. 2 - Prob. 29PCh. 2 - SafeData Corporation has the following account...Ch. 2 - Prob. 31PCh. 2 - Prob. 32PCh. 2 - Prob. 33APCh. 2 - On February 1, Piscina Corporation completed a...Ch. 2 - Prob. 1DYSCh. 2 - Prob. 2DYSCh. 2 - On August 27, 2015, Celgene Corporation acquired...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The following nominal accounts apply to a primary beneficiary company and a VIE: Primary Company VIE Company Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(800,000) (240,000) Service fees . . . . . . . . . . . . . . . . . . . . . . . (150,000) Interest revenue . . . . . . . . . . . . . . . . . . . (90,000) Interest expense. . . . . . . . . . . . . . . . . . . . 50,000 Operating expenses . . . . . . . . . . . . . . . 550,000 230,000 Depreciation expense . . . . . . . . . . . . . 100,000 40,000 The fair value of the VIE assets had a fair value $100,000 higher than book value on the date control was achieved. The asset adjusted had a 5 year life. The VIE agrees to distribute a share of its income to the primary beneficiary equal to 10% of sales revenue and service fees. Prepare income distribution…arrow_forwardThe condensed income statements through income from operations for Amazon.com, Inc., Best Buy, Inc., and Walmart Stores, Inc. for a recent fiscal year follow (in million): ............................................................. Amazon Best Buy Walmart Sales………………………………............…..…. $88,988 ........ $40,339 ...... $485,651 Cost of Goods Sold…………….....…….. 62,752 ......... 31,292 ........ 365,086 Gross Profit ……………………….…...... $26,236 ......... $ 9.047 .... $120,565 Selling, General & Administrative Expenses…... 26,058 ...... 7,592 ....93,418 Other Operating Expenses………..........……….. 0 ....... 5 ......... 0 Income From Operations……………...........…… $ 178 ........ $ 1,450 ........ $ 27,147 Required: Prepare comparative common-sized income statements for each company. (Round percentages to one decimal place.) Use the common-sized analysis to compare and interpret the financial performance of the…arrow_forwardThe Longbranch Western Wear Company has the following financial statements, which are representative of the company’s historical average. Income Statement Sales............................................ $200,000 Expenses.................................... 158,000 Earnings before interest and taxes 42,000 Interest...................................... 2,000 Earnings before taxes............ 40,000 Taxes.......................................... 20,000 Earnings after taxes................ $ 20,000 Dividends.................................. $ 10,000 Balance Sheet Assets Liabilities and Shareholders’ Equity Cash.............................. $ 10,000 Accounts payable............... $ 5,000 Accounts receivable..... 10,000 Accrued wages................... 1,000 Inventory...................... 15,000 Accrued…arrow_forward
- The comparative balance sheet of Coulson, Inc. at December 31, 20Y2 and 20Y1, is asfollows:Dec. 31, 20Y2 Dec. 31, 20Y1AssetsCash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 300,600 $ 337,800Accounts receivable (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704,400 609,600Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 918,600 865,800Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,600 26,400Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 990,000 1,386,000 Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,980,000 $ 990,000Accumulated depreciation—buildings . . . . . . . . . . . . . . . . . . . . . (397,200) (366,000)Equipment . . . . . . . . . . . . . . . . . . .…arrow_forwardDiaz Fresh discloses the following annual data. For Year Ended December 31 2020 2021 Sales revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $160,000 $240,000 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 120,000 Its cost of goods sold is based on inventories valued at cost. Assume for each year that all of the beginning inven- tory is sold by year end. Additional information regarding its inventories follows. Inventory LIFO Cost Market January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,000 $16,000 December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 18,000 December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000 20,000 Required a. Prepare the entries to apply the lower-of-cost-or-market rule at December 31, 2020, and 2021. Use an allow- ance account to reduce…arrow_forward1. Multiple-step and single step income statement. Holler, Inc. has the following data for the year ended December 31, 2021: Discontinued operations loss ......................................... $20,000 Sales discounts…………………………………………………………..5,000 Cost of goods sold ......................................................... 145,000 Rent revenue……………………………………………………………12,000 Interest expense ............................................................ 2,000 Selling expenses ........................................................... 15,000 Administrative expenses ................................................ 33,000 Sales ............................................................................. 300,000 Retained Earnings, 1/1/20 ............................................. 280,000 Dividends declared ........................................................ 50,000 Tax rate of 22% on all items Shares of common stock outstanding, 10,000 Instructions a. Prepare a multiple-step income…arrow_forward
- The income statement of Metallic Item Inc., is as follows: Metallic Item Income Statement For the Month Ended April 30, 2014 Revenue Service Revenue............................................................................ $9,500 Expenses Salaries and Wages Expense......................................................... $4,200 Depreciation Expense..................................................................... 350 Utilities Expense............................................................................. 400 Rent Expense................................................................................. 600 Supplies Expense........................................................................... 1,050 Total Expenses........................................................................…arrow_forwardThe following information is from Tejas WindowTint’s financial records. Month Sales PurchasesApril ........................... $72,000 ............................................................ $42,000May ............................. 66,000 ............................................................ 48,000June ............................ 60,000 ............................................................ 36,000July .............................. 78,000 ............................................................ 54,000 Collections from customers are normally 70 percent in the month of sale, 20 percent in the month following the sale, and 9 percent in the second month following the sale. The balance is expected to be uncollectible. All purchases are on account. Management takes full advantage of the 2 percent discount allowed on purchases paid for by the tenth of the following month. Purchases for August are…arrow_forwardComparative data on three companies in the same service industry are given below:CompanyA B CSales ....................................................... $600,000 $500,000 $ ?Net operating income .............................. $ 84,000 $ 70,000 $ ?Average operating assets ........................ $300,000 $ ? $1,000,000Margin ...................................................... ? ? 3.5%Turnover .................................................. ? ? 2ROI .......................................................... ? 7% ?Required:1. What advantages are there to breaking down the ROI computation into two separate elements, marginand turnover?2. Fill in the missing information above, and comment on the relative performance of the three companiesin as much detail as the data permit. Make specific recommendations about how to improve the ROI.arrow_forward
- The comparative balance sheet of Whitman Co. at December 31, 20Y2 and 20Y1, is as follows:Dec. 31, 20Y2 Dec. 31, 20Y1AssetsCash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 918,000 $ 964,800Accounts receivable (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 828,900 761,940Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,268,460 1,162,980Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,340 35,100Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315,900 479,700Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,462,500 900,900Accumulated depreciation—buildings . . . . . . . . . . . . . . . . . . . . . . . . . . .…arrow_forwardCommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below:Sales .................................................................................. $3,000,000Net operating income ......................................................... $150,000Average operating assets .................................................. $750,000Required:Consider each question below independently. Carry out all computations to two decimal places.1. Compute the company’s return on investment (ROI).2. The entrepreneur who founded the company is convinced that sales will increase next year by 50%and that net operating income will increase by 200%, with no increase in average operating assets.What would be the company’s ROI?3. The chief financial officer of the company believes a more realistic scenario would be a $1,000,000increase in sales, requiring a $250,000 increase in average operating assets, with a resulting…arrow_forwardQuestion Description The following income statement and selected balance sheet account data are available for Treece, Inc., at December 31, 2013 Revenue: Net sales………………………………………..$3,200,000 Interest income………………………………….. . 45,000 Gain on sale of marketable securities…….………...34,000 Total revenue…………………………………..$3,279,000 Costs and expenses: Cost of goods sold…………………………………………... $1,620,000 Operating expenses (including depreciation of $150,000)….1, 240,000 Interest expense…………………………………………….…...42,000 Income taxes…………………………………………….……....100,000 Loss on sale of plant Assets.....................................................…...12,000 Total Costs and expenses…………………………..………. $3,014,000 Net income………………………………………….…………. $260,000 Changes in the Company’s balance sheet accounts over the year are summarized as follows: Accounts receivable increased by $60,000 Accrued interest receivable decreased by $2,000 Inventory decreased by $60,000, and Account payable decreased by $16,000 Short term…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License