Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Chapter 4, Problem 4.3E
To determine
Concept Introduction:
Equity Method of valuation of investment: In this method, parent company value investment at the historical cost of the investment plus apportioned profit less dividend paid by the subsidiary company.
To Prepare:
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Planet Corporation acquired 100 percent of the voting common stock of Saturn Company on January 1, 20X7, by issuing bonds with a par value and fair value of $670,000 and making a cash payment of $24,000. At the date of acquisition, Saturn reported assets of $740,000 and liabilities of $140,000. The book values and fair values of Saturn’s net assets were equal except for land and copyrights. Saturn’s land had a fair value $16,000 higher than its book value. All of the remaining purchase price was attributable to the increased value of Saturn’s copyrights with a remaining useful life of eight years. Saturn Company reported a loss of $88,000 in 20X7 and net income of $120,000 in 20X8. Saturn paid dividends of $24,000 each year.
Required:
Assuming that Planet Corporation uses the equity method in accounting for its investment in Saturn Company, prepare all journal entries for Planet for 20X7 and 20X8.
1. S acquired 100 percent of F for P275,000. At the date of acquisition, F had the following book and market values: (see image below) What is the amount of the “Investment in F” account on S’s financial records at the acquisition date?
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…
Chapter 4 Solutions
Advanced Financial Accounting
Ch. 4 - When is the carrying value of the investment...Ch. 4 - What is a differential? How is a differential...Ch. 4 - Prob. 4.3QCh. 4 - Prob. 4.4QCh. 4 - Prob. 4.5QCh. 4 - Prob. 4.6QCh. 4 - Prob. 4.7QCh. 4 - Prob. 4.8QCh. 4 - Prob. 4.9QCh. 4 - Prob. 4.10Q
Ch. 4 - Prob. 4.11QCh. 4 - What determines whether the balance assigned to...Ch. 4 - What does the termpushdown accountingmean?Ch. 4 - Under what conditions is push-down accounting...Ch. 4 - Prob. 4.15QCh. 4 - Prob. 4.2CCh. 4 - Prob. 4.3CCh. 4 - Prob. 4.4CCh. 4 - Prob. 4.1ECh. 4 - Prob. 4.2ECh. 4 - Prob. 4.3ECh. 4 - Prob. 4.4ECh. 4 - Prob. 4.5ECh. 4 - Prob. 4.6ECh. 4 - Prob. 4.7ECh. 4 - Prob. 4.8ECh. 4 - Prob. 4.9ECh. 4 - Prob. 4.10.1ECh. 4 - Prob. 4.10.2ECh. 4 - Prob. 4.10.3ECh. 4 - Prob. 4.10.4ECh. 4 - Prob. 4.10.5ECh. 4 - Prob. 4.11.1ECh. 4 - Prob. 4.11.2ECh. 4 - Prob. 4.11.3ECh. 4 - Prob. 4.11.4ECh. 4 - Prob. 4.12ECh. 4 - Prob. 4.13ECh. 4 - Prob. 4.14ECh. 4 - Prob. 4.15ECh. 4 - Prob. 4.16ECh. 4 - Prob. 4.17ECh. 4 - Prob. 4.18.1ECh. 4 - Prob. 4.18.2ECh. 4 - Prob. 4.18.3ECh. 4 - Prob. 4.18.4ECh. 4 - Prob. 4.18.5ECh. 4 - Prob. 4.18.6ECh. 4 - Prob. 4.19ECh. 4 - Prob. 4.20ECh. 4 - Prob. 4.21ECh. 4 - Prob. 4.22ECh. 4 - Prob. 4.23ECh. 4 - Prob. 4.24AECh. 4 - Prob. 4.25PCh. 4 - Prob. 4.26PCh. 4 - Prob. 4.27PCh. 4 - Consolidated Balance Sheet Powder Company spent...Ch. 4 - Prob. 4.29PCh. 4 - Prob. 4.30PCh. 4 - Prob. 4.31PCh. 4 - Prob. 4.32PCh. 4 - Prob. 4.33PCh. 4 - Prob. 4.34PCh. 4 - Prob. 4.35PCh. 4 - Prob. 4.36PCh. 4 - Prob. 4.37AP
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