a
Introduction: Immediately after a business combination, the parent company records income and dividends from the subsidiary using the equity method, in addition, parents must also write off the portion of the differential of the excess acquisition price. Further, all the intercompany transactions must be eliminated before the preparation of consolidated financial statements.
The balance reported by P as its investment in S at December 31, 20X1, assuming P uses equity method accounting for investments
b
Introduction: Immediately after a business combination, the parent company records income and dividends from the subsidiary using the equity method, in addition, parents must also write off the portion of the differential of the excess acquisition price. Further, all the intercompany transactions must be eliminated before the preparation of consolidated financial statements.
The consolidation entries needed at December 31, 20X1.
Want to see the full answer?
Check out a sample textbook solutionChapter 5 Solutions
ADV.FIN.ACCT.LL W/CONNECT+PROCTORIO PLUS
- Putt Corporation acquired 80 percent of Slice Company's voting common stock on January 1, 20X4, for $138,000. At that date, the fair value of the noncontrolling interest was $34,500. Slice's balance sheet at the date of acquisition contained the following balances: Cash Accounts Receivable Land Building and Equipment Less: Accumulated Depreciation Total Assets SLICE COMPANY Balance Sheet January 1, 20X4 $ 20,000 35,000 90,000 300,000 (85,000) $360,000 Accounts Payable Notes Payable Common Stock Additional Paid-in Capital Retained Earnings Total Liabilities and Stockholders' Equity $ 35,000 180,000 100,000 75,000 (30,000) $360,000 At the date of acquisition, the reported book values of Slice's assets and liabilities approximated fair value. Required: Prepare the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business combination. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first…arrow_forward1. On January 1, 20X1, Sit Co. acquired 75% controlling interest in Stand Co. for P1,000,000. On the saiddate, the fair value of Stand’s identifiable net assets is P800,000. Sit Co. incurred transaction costs ofP100,000 on the acquisition. Required: Determine the following:a. The goodwill if Sit Co. uses the full IFRS and the measure non-controlling interest shall be measuredon a proportionate basis.b. The goodwill if Sit Co uses the IFRS for SMEs.c. The goodwill on December 31, 20X1 under full IFRS and IFRS for SMEsarrow_forwardMidStrata Corporation acquired 75% of the voting shares of Atoom Company on January 1, 20X1. The fair value ofthe non-controlling interest at acquisition was equal to its proportionate share of the fair value of the net assets ofAtoom. The full amount of the differential at acquisition was attributable to buildings and equipment, which had aremaining useful life of eight years. Financial statement data for the two companies and the consolidated entity atDecember 31, 20X6, are as follows:MIDSTRATA CORPORATION AND ATOOM COMPANYBalance Sheet DataDecember 31, 20X6Item MidStrata Corporation Atoom Company Consolidated EntityCash $ 67,000 $ 45,000 $ 112,000Account Receivable ? 55,000 145,000Inventory 125,000 90,000 211,000Buildings & Equipment 400,000 240,000 680,000Less: Accumulated Depreciation (180,000) (110,000) (?)Investment in Atoom Company ?Total Assets $ ? $320,000 $Accounts Payable $ 86,000 $ 20,000 $ 89,000Other Payables ? 8,000 ?Notes Payable 250,000 120,000 370,000Common Stock…arrow_forward
- On January 1, 20X3, Plimsol Company acquired 100 percent of Shipping Corporation's voting shares, at underlying book value. Plimsol uses the cost method in accounting for its investment in Shipping. Shipping's reported retained earnings of $75,000 on the date of acquisition. The trial balances for Plimsol Company and Shipping Corporation as of December 31, 20X4, follow: 24 Item Current Assets Depreciable Assets (net) Investment in Shipping Corporation Other Expenses Depreciation Expense Dividends Declared Current Liabilities Long-Term Debt Common Stock Retained Earnings Sales Dividend Income Plimsol Company Debit Credit $ 160,000 180,000 125,000 85,000 20,000 30,000 Shipping Corporation Debit Credit $ 115,000 135,000 60,000 15,000 15,000 $ 25,000 75,000 100,000 210,000 175,000 15,000 $ 600,000 $ 600,000 $ 340,000 $ 340,000 $ 20,000 50,000 50,000 Required: 1. Provide all consolidating entries required to prepare a full set of consolidated statements for 20X4. 2. Prepare a three-part…arrow_forward1. Malachi Company purchased 80% of the voting ordinary shares of Lamentations Company for P900,000. There are no liabilities recorded in the books of the acquire. Non-controlling interest is measured at proportionate share of Lamentation's identifiable net assets. The following book and fair values are available for Lamentations as of the date of acquisition: Book Value Fair Value Current assets P100,000 P200.000 Land and building 200,000 200.000 Machinery 300.000 600.000 Goodwill 100,000 ? The working paper elimination entries prepared immediately after the combination will include:arrow_forwardPenny Manufacturing Company acquired 75 percent of Saul Corporation stock at underlying book value. At the date of acquisitior fair value of the noncontrolling Interest was equal to 25 percent of Saul's book value. The balance sheets of the two companies fc January 1, 20X1, are as follows: Cash Accounts Receivable. Inventory Buildings and Equipment Less: Accumulated Depreciation Investment in Saul Corporation Total Assets PENNY MANUFACTURING COMPANY Balance Sheet January 1, 20x1 Cash Accounts Receivable Inventory Buildings and Equipment Less: Accumulated Depreciation Total Assets $ 231,500 Accounts Payable 75,000 Bonds Payable. 113,000 Common Stock 618,000 Additional Paid-In Capital (139,000) Retained Earnings 233,250 $ 1,131,758 Total Liabilities and Equities $ 159,750 380,000 181,000 31,000 380,000 $ 1,131,750 SAUL CORPORATION Balance Sheet January 1, 20x1 $ 61,000 Accounts Payable 115,000 Bonds Payable 193,000 Common Stock ($10 par) 618,000 Additional Paid-In Capital (239,000)…arrow_forward
- sarrow_forwardVishnuarrow_forwardItem Cash Pie Corporation acquired 75 percent of slice Company's ownership on January 1, 20X8, for $96,000. At that date, the fair value of the noncontrolling interest was $32,000. The book value of slice's net assets at acquisition was $92,000. The book values and fair values of Slice's assets and liabilities were equall, except for Slice's buildings and equipment, which were worth $18,400 more than book value. Accumulated depreciation on the buildings and equipment was $24,000 on the acquisition date. Buildings and equipment are depreciated on a 10-year basis. Although goodwill is not amortized, the management of Pie concluded at December 31, 20Xx8, that goodwill from its purchase of Slice shares had been impaired and the correct carrying amount was $2,600. Goodwill and goodwill impairment were assigned proportionately to the controlling and noncontrolling shareholders. Trial balance data for Pie and Slice on December 31, 20X8, are as follows: Prepare a three-part consolidation…arrow_forward
- sarrow_forwardOn January 1, 20x1, Pine Corp acquired 75% interest in Sine Inc. for P2,400,000. On that date Sine Ordinary share and Retained earnings were P2,000,000 and P1,000,000. The non-controlling interest on the date of acquisition was P800,000. The assets and liabilities of Sine’s book values approximates their fair values except for the inventories and equipment which were undervalued by P30,000 and P50,000, respectively. The equipment has a remaining estimated life of five years. On October 1, 20x1, Sine Inc. sold equipment to Pine Corp. costing P300,000 with accumulated depreciation of P120,000 for P200,000. The remaining useful life of equipment was 4 years. In year 20x1, the goodwill is impaired by P5,000. On April 30, 20x2, Pine Corp. sold equipment to Sine Inc, costing P500,000 with accumulated depreciation P100,000 for P300,000. The remaining estimated life of equipment was five years. The following information were extracted from the separate financial statements of Pine and Sine for…arrow_forwardDetermine the net income (net loss) attributable to the non-controlling asset. On January 1, ABC Acquired 60% of the outstanding voting stock of XYZ for P301,500 cash consideration. The remaining 40% of XYZ had an acquisition date fair value of P138,500. On January 1, XYZ possessed equipment (5-year life) that was undervalued on its books P25,000.XYZ also had developed several secret formulas that ABC assessed at P50,000. Theses formulas, although not recorded on XYZ's financial records, were estimated to have a 20-year future life. ABC also determined that the inventory of XYZ is overvalued by P10,000. 80% of these inventories remain unsold by the end of the year. As of December 31. the financial statements appeared as follows:arrow_forward