Explain the mechanism by which assets on intercompany assets transfers are written up or down and mention the reason for the intercompany ’s restrictions on profit on transferring assets by GAAP.

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Answer 1

Question

Chapter 4, Problem 1Q

To determine

Explain the mechanism by which assets on intercompany assets transfers are written up

or down and mention the reason for the intercompany ’s restrictions on profit on

transferring assets by GAAP.

Expert Solution & Answer

Explanation of Solution

An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. A controlling financial interest is defined as an investment of 50% or more of another entity's voting equity (or associated group of entities).

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock. Equity investment is money invested in a business by purchasing stock market shares of the company.

A business requirement may arise which requires you to move Fixed assets from one company code to another (transfer of intercompany assets) or from one organization unit to another within the same company code (transfer of intercompany assets).

The selling price of the asset to the seller becomes the buyer’s purchase cost for any sale. In the sale process, the asset sold is written up or down in value at the time of sale from its original cost to its market value, and that write-up or down in the carrying amount of the asset is reflected in the income statement as profit or loss (i.e., gross profit or loss on inventory sales and gain or loss on land sales and depreciable assets). Because under GAAP, companies within a controlled group are seen as one entity, the sale is not recognized until the asset is sold outside the controlled group. Only then has the controlled group earned profit or loss, and can be recognized in the statement of income.

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Answer 2

Question

Chapter 4, Problem 1Q

To determine

Explain the mechanism by which assets on intercompany assets transfers are written up

or down and mention the reason for the intercompany ’s restrictions on profit on

transferring assets by GAAP.

Expert Solution & Answer

Explanation of Solution

An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. A controlling financial interest is defined as an investment of 50% or more of another entity's voting equity (or associated group of entities).

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock. Equity investment is money invested in a business by purchasing stock market shares of the company.

A business requirement may arise which requires you to move Fixed assets from one company code to another (transfer of intercompany assets) or from one organization unit to another within the same company code (transfer of intercompany assets).

The selling price of the asset to the seller becomes the buyer’s purchase cost for any sale. In the sale process, the asset sold is written up or down in value at the time of sale from its original cost to its market value, and that write-up or down in the carrying amount of the asset is reflected in the income statement as profit or loss (i.e., gross profit or loss on inventory sales and gain or loss on land sales and depreciable assets). Because under GAAP, companies within a controlled group are seen as one entity, the sale is not recognized until the asset is sold outside the controlled group. Only then has the controlled group earned profit or loss, and can be recognized in the statement of income.

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Answer 3

Question

Chapter 4, Problem 1Q

To determine

Explain the mechanism by which assets on intercompany assets transfers are written up

or down and mention the reason for the intercompany ’s restrictions on profit on

transferring assets by GAAP.

Expert Solution & Answer

Explanation of Solution

An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. A controlling financial interest is defined as an investment of 50% or more of another entity's voting equity (or associated group of entities).

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock. Equity investment is money invested in a business by purchasing stock market shares of the company.

A business requirement may arise which requires you to move Fixed assets from one company code to another (transfer of intercompany assets) or from one organization unit to another within the same company code (transfer of intercompany assets).

The selling price of the asset to the seller becomes the buyer’s purchase cost for any sale. In the sale process, the asset sold is written up or down in value at the time of sale from its original cost to its market value, and that write-up or down in the carrying amount of the asset is reflected in the income statement as profit or loss (i.e., gross profit or loss on inventory sales and gain or loss on land sales and depreciable assets). Because under GAAP, companies within a controlled group are seen as one entity, the sale is not recognized until the asset is sold outside the controlled group. Only then has the controlled group earned profit or loss, and can be recognized in the statement of income.

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Answer 4

Question

Chapter 4, Problem 1Q

To determine

Explain the mechanism by which assets on intercompany assets transfers are written up

or down and mention the reason for the intercompany ’s restrictions on profit on

transferring assets by GAAP.

Expert Solution & Answer

Explanation of Solution

An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. A controlling financial interest is defined as an investment of 50% or more of another entity's voting equity (or associated group of entities).

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock. Equity investment is money invested in a business by purchasing stock market shares of the company.

A business requirement may arise which requires you to move Fixed assets from one company code to another (transfer of intercompany assets) or from one organization unit to another within the same company code (transfer of intercompany assets).

The selling price of the asset to the seller becomes the buyer’s purchase cost for any sale. In the sale process, the asset sold is written up or down in value at the time of sale from its original cost to its market value, and that write-up or down in the carrying amount of the asset is reflected in the income statement as profit or loss (i.e., gross profit or loss on inventory sales and gain or loss on land sales and depreciable assets). Because under GAAP, companies within a controlled group are seen as one entity, the sale is not recognized until the asset is sold outside the controlled group. Only then has the controlled group earned profit or loss, and can be recognized in the statement of income.

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Answer 5

Chapter 4, Problem 1Q

To determine

Explain the mechanism by which assets on intercompany assets transfers are written up

or down and mention the reason for the intercompany ’s restrictions on profit on

transferring assets by GAAP.

Expert Solution & Answer

Explanation of Solution

An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. A controlling financial interest is defined as an investment of 50% or more of another entity's voting equity (or associated group of entities).

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock. Equity investment is money invested in a business by purchasing stock market shares of the company.

A business requirement may arise which requires you to move Fixed assets from one company code to another (transfer of intercompany assets) or from one organization unit to another within the same company code (transfer of intercompany assets).

The selling price of the asset to the seller becomes the buyer’s purchase cost for any sale. In the sale process, the asset sold is written up or down in value at the time of sale from its original cost to its market value, and that write-up or down in the carrying amount of the asset is reflected in the income statement as profit or loss (i.e., gross profit or loss on inventory sales and gain or loss on land sales and depreciable assets). Because under GAAP, companies within a controlled group are seen as one entity, the sale is not recognized until the asset is sold outside the controlled group. Only then has the controlled group earned profit or loss, and can be recognized in the statement of income.

Answer 6

Chapter 4, Problem 1Q

To determine

Explain the mechanism by which assets on intercompany assets transfers are written up

or down and mention the reason for the intercompany ’s restrictions on profit on

transferring assets by GAAP.

Expert Solution & Answer

Explanation of Solution

An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. A controlling financial interest is defined as an investment of 50% or more of another entity's voting equity (or associated group of entities).

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock. Equity investment is money invested in a business by purchasing stock market shares of the company.

A business requirement may arise which requires you to move Fixed assets from one company code to another (transfer of intercompany assets) or from one organization unit to another within the same company code (transfer of intercompany assets).

The selling price of the asset to the seller becomes the buyer’s purchase cost for any sale. In the sale process, the asset sold is written up or down in value at the time of sale from its original cost to its market value, and that write-up or down in the carrying amount of the asset is reflected in the income statement as profit or loss (i.e., gross profit or loss on inventory sales and gain or loss on land sales and depreciable assets). Because under GAAP, companies within a controlled group are seen as one entity, the sale is not recognized until the asset is sold outside the controlled group. Only then has the controlled group earned profit or loss, and can be recognized in the statement of income.

Answer 7

Chapter 4, Problem 1Q

To determine

Explain the mechanism by which assets on intercompany assets transfers are written up

or down and mention the reason for the intercompany ’s restrictions on profit on

transferring assets by GAAP.

Answer 8

Expert Solution & Answer

Explanation of Solution

An acquisition is when one company acquires most or all of the shares of another company to gain control over that company. A controlling financial interest is defined as an investment of 50% or more of another entity's voting equity (or associated group of entities).

An acquisition of assets is the purchase of a corporation by purchasing its assets rather than its stock. Equity investment is money invested in a business by purchasing stock market shares of the company.

A business requirement may arise which requires you to move Fixed assets from one company code to another (transfer of intercompany assets) or from one organization unit to another within the same company code (transfer of intercompany assets).

The selling price of the asset to the seller becomes the buyer’s purchase cost for any sale. In the sale process, the asset sold is written up or down in value at the time of sale from its original cost to its market value, and that write-up or down in the carrying amount of the asset is reflected in the income statement as profit or loss (i.e., gross profit or loss on inventory sales and gain or loss on land sales and depreciable assets). Because under GAAP, companies within a controlled group are seen as one entity, the sale is not recognized until the asset is sold outside the controlled group. Only then has the controlled group earned profit or loss, and can be recognized in the statement of income.