a
Introduction: Revaluation of assets and liabilities directly on its books is referred to as push down accounting, when a revaluation of assets and liabilities takes place directly on the books of a subsidiary, there will be no differential, when revaluation takes place outside, the allocation of the differential is done in consolidation worksheet.
The entry required to record the acquisition of S on P’s books on December 31, 20X6.
b
Introduction: Revaluation of assets and liabilities directly on its books is referred to as push down accounting, when a revaluation of assets and liabilities takes place directly on the books of a subsidiary, there will be no differential, when revaluation takes place outside, the allocation of the differential is done in consolidation worksheet.
The entries recorded in books of S on December 31, 20X6 related to business combination if push down accounting is applied
c
Introduction: Revaluation of assets and liabilities directly on its books is referred to as push down accounting, when a revaluation of assets and liabilities takes place directly on the books of a subsidiary, there will be no differential, when revaluation takes place outside, the allocation of the differential is done in consolidation worksheet.
The entries that P would record during immediately after combination
d
Introduction: Revaluation of assets and liabilities directly on its books is referred to as push down accounting, when a revaluation of assets and liabilities takes place directly on the books of a subsidiary, there will be no differential, when revaluation takes place outside, the allocation of the differential is done in consolidation worksheet.
The entries recorded by P during 20X7 related to investment in S using equity method.
e
Introduction: Revaluation of assets and liabilities directly on its books is referred to as push down accounting, when a revaluation of assets and liabilities takes place directly on the books of a subsidiary, there will be no differential, when revaluation takes place outside, the allocation of the differential is done in consolidation worksheet.
The elimination entries recorded in 20X7 for full set of books
f
Introduction: Revaluation of assets and liabilities directly on its books is referred to as push down accounting, when a revaluation of assets and liabilities takes place directly on the books of a subsidiary, there will be no differential, when revaluation takes place outside, the allocation of the differential is done in consolidation worksheet.
The consolidation entries recorded 20X8
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EBK ADVANCED FINANCIAL ACCOUNTING
- Paper Company acquired 100 percent of Scissor Company's outstanding common stock for $370,000 on January 1, 20X8, when the book value of Scissor's net assets was equal to $370,000. Accumulated depreciation on this date was $24,000. Paper uses the equity method to account for investments. The following trial balance summarizes the financial position and operations for Paper and Scissor as of December 31, 20X9: Cash Accounts Receivable Inventory Investment in Scissor Company Land Buildings and Equipment Cost of Goods Sold Depreciation Expense Selling and Administrative Expense Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Common Stock Retained Earnings Sales Income from Scissor Company Total Debit $ 232,000 165,000 193,000 515,000 250,000 875,000 278,000 65,000 312,000 90,000 $ 2,975,000 Paper Company Credit $ 630,000 85,000 150,000 625,000 498,000 880,000 107,000 $ 2,975,000 Scissor Company Debit $ 116,000 97,000 115,000 1-0 125,000 250,000 178,000 12,000…arrow_forwardPrepare the set of consolidated financial statements at the end of the year.arrow_forwardPeel Corporation purchased 60 percent of Split Products Company's shares on December 31, 20X7, for $216,000. At that date, the fair value of the noncontrolling interest was $144,000. On January 1, 20X9, Peel purchased an additional 20 percent of Split's common stock for $97,000. Summarized balance sheets for Split on the dates indicated are as follows: Assets Cash Accounts Receivable Inventory Buildings & Equipment (net) Total Assets Liabilities & Equities Accounts Payable Bonds Payable Common Stock Retained Earnings Total Liabilities & Equities 20X7 $ 49,000 51,000 72,000 370,000 $542,000 December 31 20X8 Balance in investment account $ 79,000 91,000 102,000 350,000 $622,000 20X9 $ 99,000 121,000 162,000 330,000 $712,000 $ 77,000 $127,000 $167,000 105,000 105,000 105,000 155,000 155,000 155,000 205,000 235,000 285,000 $542,000 $622,000 $712,000 Split paid dividends of $22,000 in each of the three years. Peel uses the equity method in accounting for its investment in Split and…arrow_forward
- Johannes Inc. acquired 80 percent of Corner Brook Ltd. common shares on January 1, Year 4, for $744,000. At that date, the fair value of the non-controlling Interest was $186,000. Corner Brook's balance sheet contained the following amounts at the time of the combination: Cash Accounts Receivable Inventory Construction Work in Progress Other Assets (net) Total Assets 66,000 140,000 40,000 Accounts Payable $ 106,000 Bonds Payable 610,000 950,000 Common Shares ($10 par value) Retained Earnings 400,000 530,000 450,000 $1,646,000 $ 1,646,000 Total Liabilities & Equities During each of the next three years, Corner Brook reported net income of $120,000 and paid dividends of $60,000. On January 1, Year 6, Johannes sold 8,800 of the Corner Brook shares for $260,000 in cash. Johannes used the equity method in accounting for its ownership of Corner Brook. Required: (a) Compute the balance in the Investment account reported by Johannes on January 1, Year 6, before its sale of shares. (Omit $ sign…arrow_forwardOn January 2, 20X8, Primary Corporation acquired 100 percent of Secondary Company's outstanding common stock. In exchange for Secondary's stock, Primary issued bonds payable with a par and fair value of $650,000 directly to the selling stockholders of Secondary. The two companies continued to operate as separate entities subsequent to combination. Immediately prior to the combination, the book values and fair values of the companies' assets and liabilities were as follows: Secondary Company Primary Corporation Book Value Fair Value $ 12,000 $ 12,000 41,000 39,000 (2,000) 86,000 89,000 55,000 200,000 960,000 650,000 (411,000) ETT $ 741,000 $ 990,000 $ 38,000 $ 38,000 200,000 210,000 300,000 100,000 103,000 $ 741,000 Cash Receivables Allowance for Bad Debts Inventory Land Buildings and Equipment Accumulated Depreciation Patent Total Assets Current Payables Bonds Payable Common Stock Additional Paid-In Capital Retained Earnings Book Value $ 9,000 31,000 (1,000) 68,000 50,000 670,000…arrow_forwardOn January 1, 20X6, Plus Corporation acquired 90 percent of Side Corporation for $180,000 cash. Side reported net income of $30,000 and dividends of $10,000 for 20X6, 20X7, and 20X8. On January 1, 20X6, Side reported common stock outstanding of $100,000 and retained earnings of $60,000, and the fair value of the noncontrolling interest was $20,000. It held land with a book value of $30,000 and a market value of $35,000 and equipment with a book value of $50,000 and a market value of $60,000 at the date of combination. The remainder of the differential at acquisition was attributable to an increase in the value of patents, which had a remaining useful life of five years. All depreciable assets held by Side at the date of acquisition had a remaining economic life of five years. Plus uses the equity method in accounting for its investment in Side. 1) Based on the preceding information, the increase in the fair value of patents held by Side is: A. $20,000 B. $25,000 C. $15,000 D. $5,000 2)…arrow_forward
- Prime Corporation acquired 80 percent of Steak Company's voting shares on January 1, 20X4, for $280,000 in cash and marketable securities. At that date, the noncontrolling Interest had a fair value of $70,000 and Steak reported net assets of $300,000. Assume Prime uses the fully adjusted equity method. Trial balances for the two companies on December 31, 20X7, are as follows: Steak Company Iten Cash Accounts Receivable Inventory Buildings and Equipment Investment in Steak Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Bond Premium Connon Stock Additional Paid-in Capital Retained Earnings Sales Other Income Income from Steak Company Total No A B C D E LL F G Event 1 Additional Information 1. The full amount of the differential at acquisition was assigned to buildings and equipment with a remaining 10-year economic life. 2. Prime and Steak regularly purchase Inventory from each other. During 20X6,…arrow_forwardplease answer within 30 minutes.arrow_forwardOn January 5, 20X1, Alpha Inc. acquired 80% of the outstanding voting shares of Beta Inc. for $2,000,000 cash. Following are the separate balance sheets for the two companies immediately after the stock purchase, as well as fair value information regarding Beta Inc.: Beta Alpha Book Value Fair Value Assets Current assets $ 1,750,000 $ 500,000 $ 500,000 Fixed assets, net 5,000,000 1,625,000 2,000,000 Investment in Beta 2,000,000 - - Total Assets $ 8,750,000 $ 2,125,000 $ 2,500,000 Liabilities Current liabilities $ 250,000 $ 125,000 $ 125,000 Stockholders' Equity Common stock 7,000,000 1,500,000 Capital in excess of par 500,000 - Retained earnings 1,000,000 500,000 Total Stockholders' Equity 8,500,000 2,000,000 Total Liabilities and Stockholders’ Equity $ 8,750,000 $ 2,125,000 Required: Prepare the entries…arrow_forward
- P Company acquired all the outstanding shares of S Company by issuing 50,000 shares with a par value of P100 on July 1, 2021. P's ordinary shares were selling at P102 per share at the date of acquisition. On the same date, the net asset of S had a carrying value and fair value of P3,800,000 and P4,500,000 respectively. Out of pocket expenses of the business combination were as follows (see image below). How much is the amount charged to expense? Legal fees for contract of business combination Audit fees for SEC registration of share issue Brokerage fee Accountant fee for pre-acquisition audit Printing and registration of stock certificates Other direct costs of acquisition 41,200 50,000 22,500 35,000 10,000 16,800 General administrative costs 25,000 12,100 Listing fees in issuing new sharesarrow_forwardAshvinarrow_forwardPopoy Corporation (PC) purchased all the common shares of Sia Company (SC) on January 1, 20X1, for P180,000 cash. The fair value and carrying amounts of SC's net identifiable assets are equal. The trial balances for both companies on December 31, 20x1 are as follows: Popoy Corporation Debit Sia Company Credit Debit Credit Cash 15,000 30,000 70,000 325,000 5,000 70,000 60,000 225,000 Accounts Receivable Inventory Depreciable Assets, net Investment in Samantha Company 180,000 25,000 Operating Expenses Cost of Goods Sold 15,000 105,000 75,000 Dividends Declared 40,000 10,500 Accounts Payable Notes Payable Common Stock Retained Earnings Sales 50,000 40,500 120,000 100,000 80,000 120,000 99,500 200,000 230,000 200,000 10,500 790,000 790,000 Dividend Income 460,500 460,500 Required: Prepare the set of consolidated financial statements at the end of the year. Follow the process given in the handout.arrow_forward