The P Ltd acquires all issued capital of the S Ltd for a consideration of $1,000,000 cash and 800,000 shares eachvalued at $1.50. The summary statement of the financial position of the subsidiary company immediatelyfollowing the acquisition is:Fair value of assets acquiredFair value of liabilities acquiredTotal shareholders' equity of the subsidiary companyRetained earnings of the subsidiary company$2,640,000$720,000$800,000$1,120,000Required:(a) Pass the necessary journal entry to record the acquisition ..(b) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition(c) Pass the necessary consolidation entry to eliminate the subsidiary by the parent company,(d) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition if the purchaseconsideration paid was $1,000,000 cash and 400,000 shares each valued at $1.50 .

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Answered: The P Ltd acquires all issued capital…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, 20x8, Parent Company purchased 80% of the outstanding shares of Subsidiary Company for P800,000. On the date of acquisition, Subsidiary Company reported Ordinary Shares of P800,000 and Retained Earnings of P200,000. Subsidiary’s Inventory was understated by P20,000; Equipment with a 5-year life was understated by P20,000, Building with an 8-year life was understated by P80,000 and land was understated by P40,000. The non-controlling interest is to be stated at fair value and the fair value of the non-controlling interest on January 1, 20x8 is P210,000. During the year, Parent sold goods to Subsidiary for P150,000 at a 25% mark-up and in turn purchased P200,000 of Subsidiary’s goods which Subsidiary sold at a 20% mark-up. From the goods purchased, P50,000 remain in Parent’s books at the end of the year, while P20,000 remain in Subsidiary’s books at the end of the year. 30% of the undervalued inventory of Subsidiary still remain unsold by the end of 20x8. The following are…
What is the amount of pre-acquisition earnings on the acquisition date consolidated income statement if the parent acquires 90 percent of the subsidiary’s stock and the following income statement accounts exist at the acquisition date? Parent Subsidiary Sales P250,000 P60,000 Cost of Goods Sold 120,000 12,000 Depreciation Expense 10,000 5,000 Operating Expenses 40,000 8,000 Income Tax Expense 32,000 14,000 2. Using the same information in No. 1, what is the imputed value of a subsidiary if the parent pays P56,000 for 80 percent of the subsidiary’s stock? Use the following information for question 3 and 4: Marksman acquired 100 percent of Tribal Transit for P275,000. At the date of acquisition, Fast Transit…
Unity Ltd acquired 100% of the issued shares of Vista Ltd for cash consideration of $250 000. At the date of acquisition, Vista Ltd Had had share capital of $100 000, retained earnings of $60 000 and liabilities of $80 000. There are no fair value adjustments required at the acquisition date. What is the amount of goodwill recognised on consolidation? O a $10,000 O b. $90,000 O $110,000 O d. $150,000 Next page
Pushdown Accounting Assume a parent company acquires its subsidiary by paying $1,700,000 for all of the outstanding voting shares of the investee. On the acquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipment with a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent and subsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidiary: Parent Parent Subsidiary Assets: Cash & receivables $ 800,000 $ 350,000 Inventory 600,000 200,000 Property & equipment, net 2,300,000 1,025,000 Equity investment 1,700,000 Licenses - 275,000 $ 5,400,000 $ 1,850,000 Liabilities and stockholders' equity: Current liabilities $ 400,000 $ 400,000 Other liabilities 300,000 - Note payable - 600,000 Common stock 1,670,000…
How much is the non-controlling interest in profit of Subsidiary Company on December 31, 2x19?
On January 1, 20x8,Parent Company purchased 80% of the outstanding shares of Subsidiary Company for P800,000. On the date of acquisition, Subsidiary Company reported Ordinary Shares of P800,000 and Retained Earnings of P200,000. Subsidiary's Inventory was understated by P20,000; Equipment with a 5-year life was understated by P20,000, Building with an 8-year life was understated by P80,000 and land was understated by P40,000. The non-controlling interest is to be stated at fair value and the fair value of the non-controlling interest on January 1, 20x8 is P210,000. The following are taken from the books of Parent and Subsidiary for 20x8. * Parent Subsidiary Sales 2,000,000 1,500,000 350, 000 150,000 50,000 Gross Profit 550,000 200,000 100,000 Net Income Dividend Declared (to be paid on Jan 15, 20x9) Total Assets 5,000,000 4,000,000 Determine the Total Assets as of December 31, 20x8.
7
Numbers 62 and 63 (Business Combination – Acquisition of majority shares) Entity A acquired 60,000 out of 100,000 outstanding ordinary shares of Entity B which enabled the former to obtain control of the latter at an acquisition price of P1,000,000. Entity A paid P100,000 acquisition related costs and P50,000 indirect costs of business combination. At the date of acquisition, the at P1,600,000. An asset of Entity B is overvalued by P60,000 while one liability is undervalued by P40,000. assets of Entity B are reported a. What is the initial measurement of noncontrolling interest in net assets in the consolidated statement of financial position? b. What is the goodwill or gain on bargain purchase arising from business combination?
On January 1, 20x8,Parent Company purchased 80% of the outstanding shares of Subsidiary Company for P800,000. On the date of acquisition, Subsidiary Company reported Ordinary Shares of P800,000 and Retained Earnings of P200,000. Subsidiary’s Inventory was understated by P20,000; Equipment with a 5-year life was understated by P20,000, Building with an 8-year life was understated by P80,000 and land was understated by P40,000. The non-controlling interest is to be stated at fair value and the fair value of the non-controlling interest on January 1, 20x8 is P210,000. The following are taken from the books of Parent and Subsidiary for 20x8. 1) From the given data, determine the total assets as of December 31, 20x1. 2) From the given data, assuming the retained earning of Subsidiary on December 31, 20x11 is P350,000, determine the non-controlling interest to be reported in the consolidated financial statements on December 31, 20x11 assuming no changes to Subsidiary company’s ordinary…

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