ABC Corp acquired 30,000 shares of XYZ Co. The shares were actively traded in the three markets. The following data were made available: PSE Nikkei NYSE Market Price 100 105 102 Transaction Cost 4 10 5 Transport costs 5 10 20 ABC Corp normally buys and sells XYZ's shares in PSE. What is the fair value of the investments? 2,850,000 2,970,000 3,000,000 3,120,000

ABC Corp acquired 30,000 shares of XYZ Co. The shares were actively traded in the three markets. The following data were made available: PSE Nikkei NYSE Market Price 100 105 102 Transaction Cost 4 10 5 Transport costs 5 10 20 ABC Corp normally buys and sells XYZ's shares in PSE. What is the fair value of the investments? 2,850,000 2,970,000 3,000,000 3,120,000

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 28E

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1. ABC Corp acquired 30,000 shares of XYZ Co. The shares were actively traded in the three markets. The following data were made available:                                         PSE Nikkei NYSE Quoted Price 100 105 102 Transaction Cost 4 10 5 ABC Corp normally buys and sells XYZ's shares in Nikkei. What is the fair value of the investments? 2,910,000 3,000,000 3,060,000 3,150,000
A piece of equipment is acquired by an entity by issuing 10,000 shares of P10 par ordinary shares. The equipment has a list price of P150,000 and a trade discount of 10%.   If paid in cash at the time of purchase, a 5% cash discount is allowed. The company’s ordinary shares are actively traded in a capital market with an average market price of P13 at the date of the exchange. What is the cost of the equipment? A. 135,000 B. 128,250 C. 150,000 D. 130,000
A piece of equipment is acquired by an entity by issuing 10,000 shares of P10 par ordinary shares. The equipment has a list price of P150,000 and a trade discount of 10%.   If paid in cash at the time of purchase, a 5% cash discount is allowed. The company’s ordinary shares are actively traded in a capital market with an average market price of P13 at the date of the exchange. What is the cost of the equipment?
You are given the following information about Target Inc.: Identifiable assets: Carrying amount: $ 540,000 Fair value: $ 485,000 Identifiable Liabilities: Carrying amount: $ 150,000 Fair value: $ 190,000 The total number of shares issued by Target is 20,000, at an average market price of $23 per share. Consider two scenarios: 1) Shell Inc. is set up to acquire Target, and buys for cash 100% of the issued share capital of Target for $ 510,000. 2) Shell buys an 82% stake in Target, thus acquiring a majority interest. The price paid is now $425,000. Assume that the tax rate is 0, so that you can ignore any deferred tax considerations. REQUIRED: A) Calculate the value of goodwill at acquisition date for the two scenarios, using both the full and partial method of goodwill in scenario 2). B) Provide all of the consolidation entries at the date of acquisition (not only those related to the elimination…
ACE Ltd has an outstanding shares of 10,000,000 shares. Kimmy Ltd purchases 100,000 shares of ACE Ltd at $4 per share. Transaction cost is $1,000. How much will the company capitalise if the investment is classified at fair value through OCI? Choose one of the following answers. 401,000 None of the above 399,000 400,000
8.On August 20X1, ABC Company bought 10,000 shares of Z Corp at P120,000. Commission and taxes related to the acquisition were P5,000. On Dec 31, 20X1 Z Corp's share had a fair value of P14 per share. Half of the shares were sold at P15 per share. Transaction costs related to the sale were P3,500. ABC Company's investment model is to hold collect and sell.How much is the unrealized gain (loss) at FV change on Dec 31, 20X1? 20,000 15,000 10,000 0
Zaata Ltd decided to repurchase 500,000 of its ordinary shares under a buy-back scheme for $5.70 per share. At the date of the buy-back, the equity of the company consisted of: Share capital (6,000,000 shares fully paid) General reserve Retained earnings $ 12,000,000 1,360,000 2,460,000 The costs of the buy-back scheme amounted to $7,600. Instructions: A.Prepare the journal entries to account for the buy-back, assuming: (i)that the original amount of the shares is eliminated from Share Capital, and then any remaining buy-back price adjusted equally against the General Reserve and Retained Earnings accounts. (ii)that the buy-back is not adjusted against share capital, but is adjusted firstly against the General Reserve account, then any remaining against the Retained Earnings account. B.Assume now that the buy-back price per share was equal to $2.40 and that the company had no General Reserve account, and retained earnings of only $1,040,000. Further, assume that the company…
11. On Jan 1, 20X1, ABC purchased 24,000 shares of XYZ for P200,000 and paid commission of P10,000 on the acquisition. ABC designated the investment to be measured at FVOCI. On Dec 31, 20X1, the shares were quoted at P20 per share. On Jan 10, 20X2 were sold for P30 per share incurring P12,000 transaction costs. What amount of gain (loss) should ABC recognize on Dec 31, 20x1 and Jan 10, 20X2 respectively? 270,000; 228,000 280,000; 228,000 280,000 282,000 293,000; 220,000
World Enterprises is determined to acquire Intous Ltd through exchanging stocks. World Enterprises is offering R65 per share for Intous ltd. You are given the following information World Enterprises Intous Ltd Net Income R50 R10 Shares outstanding 5000 2000 Earnings per share R10 R5 Market price per share R150 Price earnings ratio R15 a. Calculate the number of shares to be issued by Intous Ltd: b. Calculate combined earnings per share of both World Enterprise and Intous Ltd c. Calculate price earnings ratio (P/E ratio) paid (Hint: use the R65 to calculate the P/E ratio) d. Compare the current and paid P / E ratios
Read and understand the problem below. Write the answer on the space provided below. The capital accounts of X and Y Company before the admission of Z are as follows: Capital accounts P/L ratios X, Capital P100,000 30% Y, Capital 200,000 70% P300,000 Case 1 Z purchases 10% interest out of the 30% interest of A for P100, 000. The net assets of the firm as of this date approximate their fair values. Provide the journal entry to record the transaction. Case 2 Z purchases 10% interest in the partnership by investing P70,000 cash to the business. The net assets of the firm as of this date approximate their fair values. Requirements: Provide the journal entry to record the admission of Z.(show your computation below) Compute for capital balances of the partners after the admission of Z. (show your computation below) Compute for the new P/L ratios of the partners.
2. Caloy Co. bought 1,000 shares from Bayan Co. The shares have no active market, but an identical or similar asset has an active market. The identical asset, however, has multiple markets. Caloy determines that the identical asset has the following market values: Market A Market B Quoted price 500 600 Related transaction cost 25 150 How much is fair valuation of the investment?
9. If ABC Co purchases the net assets of XYZ Co by issuing 50,000 shares of their P20 par value ordinary shares with a fair value of P30 per share and paying professional fees to arrange the acquisition amounting to P20,000; legal fees of P30,000; costs for maintaining the acquisition of the department, P30,000; cost of registering the securities, P25,000 and cost of issuing the securities, P15,000. Parent also determines contingent consideration to be paid in the future amounting to P100,000 on the date of acquisition but could go as high as P150,000. From the data, determine the total amount of share premium to be reported by ABC Co after the acquisition. *