Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 1, Problem 1.13.2P
To determine
Introduction: Acquisition is a corporate term used to represent purchase of another company and gaining the ownership of the company.
To Prepare:
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
On January 1, 202X, Dianne Corporation acquired the net assets of Cyril Corporation by issuing 60,000
shares with par and market values of P20 and P2,300,000, respectively. Moreover, it agreed to pay an
additional P170,000 on January 1, 202z if the average income in 202X and 202Y exceeds P150,000 per
year. The expected value of the additional payment is estimated at P102,000 based on the 60% probability
of achieving the target average income. The carrying and fair values of Cyril Corporation's identifiable net
assets as of the acquisition date are P2,200,000 and P2,000,000, respectively.
Required:
a. Determine the amount of goodwill or gain on bargain purchase from the above transaction.
b. Give the adjusting entry assuming that the company determined on September 30, 202X that there is
an 80% probability that the estimated average income will be achieved.
c. Give the adjusting entry assuming that the company determined on March 31, 202Y that there is a 90%
probability that the…
On January 1, 2020 Chicken Wings Company purchased P3,000,000, 8% bonds of Fried Chicken Corporation for an amount that yields 10%. Interest is payable every June 30 and December 31 of the year. The bonds will mature on December 31, 2024. The business model of the entity is to collect the contractual cash flows which represent sole payment of principal and interest. On April 1, 2022, to pay maturing obligations, Chicken Wings Company sold P1,000,000 face value bonds for total proceeds of 104. Additionally, Fried Chicken Corporation is currently financially distressed and after paying the amount due on December 31, 2022 was unable to meet the original terms of the contract. Fried Chicken Corporation arrange for negotiation by lowering the interest rate from 8% to 4% for the remaining terms.How much is the total (net) impact in the profit or loss of the bond transactions for the year 2022?
On January 1, 202X, Dianne Corporation acquired the net assets of Cyril Corporation by issuing 60,000 shares with par and market values of P20 and P2,300,000, respectively. Moreover, it agreed to pay an additional P170,000 on January 1, 202Z if the average income in 202X and 202Y exceeds P150,000 per year. The expected value of the additional payment is estimated at P102,000 based on the 60% probability of achieving the target average income. The carrying and fair values of Cyril Corporation’s identifiable net assets as of the acquisition date are P2,200,000 and P2,000,000, respectively. Required:a. Determine the amount of goodwill or gain on bargain purchase from the above transaction.b. Give the adjusting entry assuming that the company determined on September 30, 202X that there is an 80% probability that the estimated average income will be achieved.c. Give the adjusting entry assuming that the company determined on March 31, 202Y that there is a 90% probability that the estimated…
Chapter 1 Solutions
Advanced Accounting
Ch. 1 - Prob. 1UTICh. 1 - Prob. 3UTICh. 1 - Prob. 4UTICh. 1 - Prob. 5UTICh. 1 - Prob. 6UTICh. 1 - Prob. 7UTICh. 1 - Prob. 8UTICh. 1 - Prob. 9UTICh. 1 - Prob. 10UTICh. 1 - Prob. 1.1E
Ch. 1 - Prob. 1.2ECh. 1 - Prob. 1.3ECh. 1 - Prob. 2ECh. 1 - Prob. 5.1ECh. 1 - Prob. 5.2ECh. 1 - Prob. 6ECh. 1 - Lake craft Company has the following balance...Ch. 1 - Prob. 8.2ECh. 1 - Prob. 8.3ECh. 1 - Prob. 9.1ECh. 1 - Prob. 9.2ECh. 1 - Prob. 1A.1.1AECh. 1 - Prob. 1A.1.2AECh. 1 - Prob. 1.2PCh. 1 - Prob. 1.3.1PCh. 1 - Prob. 1.4PCh. 1 - Jack Company is a Corporation that was organized...Ch. 1 - Prob. 1.6PCh. 1 - Prob. 1.7.1PCh. 1 - Prob. 1.7.2PCh. 1 - Prob. 1.8PCh. 1 - Prob. 1.10.A1PCh. 1 - Prob. 1.11PCh. 1 - Prob. 1.12PCh. 1 - Prob. 1.13.2PCh. 1 - Prob. 1A.1.1APCh. 1 - Prob. 1A.1.2APCh. 1 - (Note: The use 01 a financial calculator or Excel...Ch. 1 - Frontier does not have publicly traded stock. You...Ch. 1 - Frontier does not have publicly traded stock. You...Ch. 1 - Prob. 1.1B.3CCh. 1 - Prob. 1.1CCCh. 1 - Prob. 1.2.1CCh. 1 - Prob. 1.2.2CCh. 1 - Case 1-2 Disney Acquires Marvel Entertainment On...
Knowledge Booster
Similar questions
- On January 1, 202X, Dianne Corporation acquired the net assets of Cyril Corporation by issuing 60,000 shares with par and market values of P20 and P2,300,000, respectively. Moreover, it agreed to pay an additional P170,000 on January 1, 202Z if the average income in 202X and 202Y exceeds P150,000 per year. The expected value of the additional payment is estimated at P102,000 based on the 60% probability of achieving the target average income. The carrying and fair values of Cyril Corporation’s identifiable net assets as of the acquisition date are P2,200,000 and P2,000,000, respectively. Required: Determine the amount of goodwill or gain on bargain purchase from the above transaction. Give the adjusting entry assuming that the company determined on September 30, 202X that there is an 80% probability that the estimated average income will be achieved. Give the adjusting entry assuming that the company determined on March 31, 202Y that there is a 90% probability that the estimated…arrow_forwardMarcus Company made the following transactions in the ordinary shares of Cato Company designated as a financial asset at fair value through profit or loss: July 16, 2018- Purchased 10,000 shares at P45 per share. nces June 28, 2019 - Sold 2,000 shares for P51 per share. ations May 18, 2020 - Sold 2,500 shares for P33 per share. The end-of-year market prices for the shares were as follows: December 31, 2018 - P47 per share December 31, 2019 P39 per share December 31, 2020 P31 per share 1. How much should be recognized in 2020 profit or loss as a result of the fair value changes? (use negative sign if your answer is a loss) 2. How much should be recognized as realized gain on sale for the year ended December 31, 2020? (use negative sign if your answer is a loss) 1 2)arrow_forwardPanda Company acquired a $20,000 bond originally issued by its 75%-owned subsidiary on January 2, 2015. The bond was issued in a prior year for $21,250, matures January 1, 2020, and pays 8% interest at December 31. The bond's book value at January 2, 2015 is $20,625, and Panda paid $18,500 to purchase it. Straight-line amortization is used by both companies. How much interest income should be eliminated in 2015?arrow_forward
- Highlight, Inc., owns all outstanding stock of Kiort Corporation. The two companies report the following balances for the year ending December 31, 2017:On January 1, 2017, Highlight acquired on the open market bonds for $108,000 originally issued by Kiort. This investment had an effective rate of 8 percent. The bonds had a face value of $100,000 and a cash interest rate of 9 percent. At the date of acquisition, these bonds were shown as liabilities by Kiort with a carrying amount of $84,000 (based on an effective rate of 11 percent). Determine the balances that should appear on a consolidated income statement for 2017.arrow_forwardOn January 1, 2020, AB Company purchased the net assets of the CD Company by issuing 100,000 shares of its P1 par value stock when the fair value of the stock was P6.20. It was furtheragreed that Honey Mahogany would pay an additional amount on January 1, 2022, if the average income during the 2-year period of 2020-2021 exceeded P80,000 per year. The expected value of this consideration was calculated as P184,000; the measurement period is one year. What amount will be recorded as goodwill on January 1, 2020?A. ZeroB. 100,000C. 180,000D. 284,000arrow_forwardSky Ltd acquired all the issued shares of Jupiter Ltd on 1 January 2019. The following transactions occurred between the two entities: • On 1 June 2020, Sky Ltd sold inventory to Jupiter Ltd for $12 000; By 30 June 2020, Jupiter Ltd had sold 20% of this inventory to other entities for $3000. The other 80% was all sold to external entities by 30 June 2021 for $13 000. • During the 2020–21 period, Jupiter Ltd sold inventory to Sky Ltd for $6000 at cost plus 20% markup. Of this inventory, 20% remained on hand in Sky Ltd at 30 June 2021. The tax rate is 30%. Required: a) Prepare the consolidation worksheet entries for Sky Ltd at 30 June 2021 concerning the intragroup inventory transfers. b) Compute the cost of goods sold to be reported in the consolidated income statement for 2021 relating to this intra-group sale. Please avoid solutions in an image based thankuarrow_forward
- Sky Ltd acquired all the issued shares of Jupiter Ltd on 1 January 2019. The following transactions occurred between the two entities: • On 1 June 2020, Sky Ltd sold inventory to Jupiter Ltd for $12 000; By 30 June 2020, Jupiter Ltd had sold 20% of this inventory to other entities for $3000. The other 80% was all sold to external entities by 30 June 2021 for $13 000. . During the 2020-21 period, Jupiter Ltd sold inventory to Sky Ltd for $6000 at cost plus 20% markup. Of this inventory, 20% remained on hand in Sky Ltd at 30 June 2021. The tax rate is 30%. Required: Prepare the consolidation worksheet entries for Sky Ltd at 30 June 2021 concerning the intragroup inventory transfers.arrow_forwarda) On May 31st,2020, Ford company purchased a long-term investment related to Motro Company for $12 million as trading securities, of 8% quoted bonds. On the same date the business acquired $15 million of Cora Company shares as available-for sale security and purchased Treasury bonds for $3 million, from Samsuc Company hoping to generate profit in short period of time. b) On November 15th, 2020, Ford company sold the Samsuc Treasury bonds for $4 million. c) On December 31st, 2020, record the necessary adjusting entry(s) and closing entries related to the investments. The market prices of the investments are: Motro Company $11.5 million Cora Company $16 million Samsuc Company $5 million Required: Record the necessary adjusting entries. Indicate any amounts that Ford would report in its 2020 statement of financial position and income statement as result of these investments.arrow_forwardOn January 1, 2020, Alice Company purchased 40,000 shares of Jasper at P100 per share. The investment is measured at fair value through other comprehensive income. Brokerage fees amounted to P120,000. A P5 dividend per share of Jasper had been declared on December 15, 2019, to be paid on March 31, 2020 to shareholders of record on January 31, 2020. No other transactions occurred in 2020 affecting the investment in Jasper's share. What is the initial measurement of the investment?arrow_forward
- Tanner-UNF Corporation acquired as a long-term investment $260.0 million of 7.0 % bonds, dated July 1, on July 1, 2024. Company management has the positive intent and ability to hold the bonds until maturity. Tanner-UNF paid $260.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2024, was $240.0 million. Required: 1. How will Tanner-UNF's investment in the bonds on July 1, 2024 affect the financial statements? 2. How will Tanner-UNF's receipt of interest on December 31, 2024, affect the financial statements? 3. At what amount will Tanner-UNF report its investment in the December 31, 2024, balance sheet? 4. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2025, for $220.0 million. How will the sale of the bond investment affect Tanner-UNF's financial statements?…arrow_forwardMills Corporation acquired as a long-term investment $260 million of 5% bonds, dated July 1, on July 1, 2024. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 3% for bonds of similar risk and maturity. Mills paid $300 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2024, was $280 million. Suppose Moody’s bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January 2, 2025, for $315 million. Prepare the journal entries required on the date of the sale. 1) The recorded fair value adjustment is 35.0 January 2, 2025 Fair value adjustment 35.0 Gain on investment (unrealized,OCI) 35.0 * 2) record any reclassification adjustment and what would the amortization schedule look like?arrow_forwardABC Company and XYZ Company have announced terms of an exchange agreement under which ABC will issue 10,000 shares of its P5 par value ordinary shares to acquire all of XYZ’s assets. ABC’s shares are trading at P28, and XYZ’s P10 par value shares are trading at P15. Historical cost and fair value statement of financial position data on January 1, 2021, are as follows: what amount will be reported for Shareholders’ Equity in the combined company’s statement of financial position immediately following the business combination?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning