On 1 January 2020, Company P purchased 80% of the equity of Company S. The following transactions arose at the acquisition date. Deferred cash payment Immediate cash payment Issue of P's shares Due diligence fees paid to lawyers Equipment transferred $1,000,000 payable 3 years later $500,000 1,200,000 shares $40,000 $30,000 Note: a. P's effective interest rate was 5% per annum. b. P's share price was $1.3. c. The fair value of non-controlling interests at acquisition date was $640,000. d. Share capital and Retained earnings of S were $1,000,000 and $900,000 respectively on 1 January 2020. On the same day, there was an intangible asset carried in S at $500,000 but the fair value of it was $800,000. e. Fair value of the equipment transferred was close to its book value. Required: a. Determine the fair value of the consideration transferred on 1 January 2020 in accordance with IFRS 3 Business Combinations. Round to the nearest integer. b. Prepare the journal entries in P's books on 1 January 2020. c. Calculate the goodwill on 1 January 2020. d. Discuss the three qualitative factors set out in IFRS 10 Consolidated Financial Statements to determine the existence of "Control".

On 1 January 2020, Company P purchased 80% of the equity of Company S. The following transactions arose at the acquisition date. Deferred cash payment Immediate cash payment Issue of P's shares Due diligence fees paid to lawyers Equipment transferred $1,000,000 payable 3 years later $500,000 1,200,000 shares $40,000 $30,000 Note: a. P's effective interest rate was 5% per annum. b. P's share price was $1.3. c. The fair value of non-controlling interests at acquisition date was $640,000. d. Share capital and Retained earnings of S were $1,000,000 and $900,000 respectively on 1 January 2020. On the same day, there was an intangible asset carried in S at $500,000 but the fair value of it was $800,000. e. Fair value of the equipment transferred was close to its book value. Required: a. Determine the fair value of the consideration transferred on 1 January 2020 in accordance with IFRS 3 Business Combinations. Round to the nearest integer. b. Prepare the journal entries in P's books on 1 January 2020. c. Calculate the goodwill on 1 January 2020. d. Discuss the three qualitative factors set out in IFRS 10 Consolidated Financial Statements to determine the existence of "Control".

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 14E: Transfer between Categories On December 31, 2018, Leslie Company held an investment in bonds of...

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Whirlie Inc. issued $300,000 face value, 10% paid annually, 10-year bonds for $319,251 when the market of interest was 9%. The company uses the effective-interest method of amortization. At the end of the year, the company will record ________. A. a credit to cash for $28,733 B. a debit to interest expense for $31,267 C. a debit to Discount on Bonds Payable for $1,267 D. a debit to Premium on Bonds Payable for $1.267
Transfer between Categories On December 31, 2018, Leslie Company held an investment in bonds of Kaufmann Company which it categorized as being held to maturity. At that time, the 8%, 100,000 face value bonds had a carrying value of 107,023.56 and were being amortized using the effective interest method based on a market rate of 7%. Interest on these bonds is paid annually each December 31. On December 31, 2019, after recording the interest earned, Leslie decided to reclassify the Kaufmann bonds to its available-for-sale category in anticipation of a major restructuring. At that time, the ending quoted market price for the bonds was 105,000. Required: Prepare the journal entries on December 31, 2019, to record the interest earned and the reclassification.
Waseca Company had 5 convertible securities outstanding during all of 2019. It paid the appropriate interest (and amortized any related premium or discount using the straight line method) and dividends on each security during 2019. Each of the convertible securities is described in the following table: Additional data: Net income for 2019 totaled 119,460. The weighted average number of common shares outstanding during 2019 was 40,000 shares. No share options or warrants arc outstanding. The effective corporate income tax rate is 30%. Required: 1. Prepare a schedule that lists the impact of the assumed conversion of each convertible security on diluted earnings per share. 2. Prepare a ranking of the order in which each of the convertible securities should be included in diluted earnings per share. 3. Compute basic earnings per share. 4. Compute diluted earnings per share. 5. Indicate the amount(s) of the earnings per share that Waseca would report on its 2019 income statement.
On January 1, 2020 Psy Company purchased all the net assets of SM Ent. Company: Issuance of 20,000 unissued shares of its 10 par value ordinary share capital. As of this date, the shares of Psy were selling at 40 per share. Issuance of bonds with a face value of $300,000 but are currently at 110. A contingent payment of $200,000 cash on January 1, 2020, if the average income of SM Ent. Company during the two-year period (2020-2021) exceeds $250,000 per year. Psy estimates that there is a 20% chance or probability that the $200,000 payment will be required. Issuance of 5,000 additional shares on January 1, 2022 to the former shareholders of SM Ent. Company if the average income cover the next two years (2020-2021) equalled or exceeded $350,000. The additional 5,000 shares expected to be issued are valued at $75,000. Professional fees of $9,000 were also paid by Psy to its external auditors to finalize the business combination. As of the date of acquisition, SM Ent. Company reported…
On 1 January 2020, Company P purchased 80% of the equity of Company S. The following transactions arose at the acquisition date. Deferred cash payment Immediate cash payment Issue of P's shares Due diligence fees paid to lawyers Equipment transferred $1,000,000 payable 3 years later $500,000 1,200,000 shares $40,000 $30,000 Note: a. P's effective interest rate was 5% per annum. b. P's share price was $1.3. c. The fair value of non-controlling interests at acquisition date was $640,000. d. Share capital and Retained earnings of S were $1,000,000 and $900,000 respectively on 1 January 2020. On the same day, there was an intangible asset carried in S at $500,000 but the fair value of it was $800,000. e. Fair value of the equipment transferred was close to its book value.
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