Concept explainers
a.
Concept Introduction:
Consolidation: Consolidation is the process of accounting where books of the parent company is reported along with the books of the subsidiary company in consolidated/combined form after making necessary
To Explain:
b.
Concept Introduction:
Consolidation: Consolidation is the process of accounting where books of the parent company is reported along with the books of the subsidiary company in consolidated/combined form after making necessary adjustment entries as required in the process of consolidation.
To Explain: Journal entry that S recorded for receipt of the assets and accounts payable from P.
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ADVANCED FINANCIAL ACCOUNTING IA
- Question 1 .Panther Corporation decided to establish Snake Company as a wholly owned subsidiary by transferring some of its existing assets and liabilities to the new entity. In exchange, Snake issued 100,000 shares of $2 par value common stock. The following information is provided on the assets and liabilities transferred: Cash Accounts Receivable Patent Building & Equipment Land Accounts Payable Cost $50,000 80,000 70,000 200,000 60,000 20,000 Book Value $50,000 75,000 70,000 140,000 60,000 20,000 Required: a. Give the journal entry that Panther recorded for the transfer of assets and liabilities to Snake b. Give the journal entry that Snake recorded for the receipt of assets and liabilities from Pantherarrow_forwardPab Corporation decided to establish Sollon Company as a wholly owned subsidiary by transferring some of its existing assets and liabilities to the new entity. In exchange, Sollon issued Pab 35,000 shares of $7 par value common stock. The following information is provided on the assets and accounts payable transferred: Cost Book Value Fair Value Cash $ 32,000 $ 32,000 $ 32,000 Inventory 83,000 83,000 83,000 Land 69,000 69,000 99,000 Buildings 188,000 147,000 249,000 Equipment 95,000 74,000 123,000 Accounts Payable 58,000 58,000 58,000 Required: Prepare the journal entry that Pab recorded for the transfer of assets and accounts payable to Sollon Prepare the journal entry that Sollon recorded for the receipt of assets and accounts payable from Pab.arrow_forwardSubject: Corporate Accounting Q) The P Ltd acquires all issued capital of the S Ltd for a consideration of $1,000,000 cash and 800,000 shares each valued at $1.50. The summary statement of the financial position of the subsidiary company immediately following the acquisition is: Fair value of assets acquired $2,640,000Fair value of liabilities acquired $720,000Total shareholders’ equity of the subsidiary company $800,000Retained earnings of the subsidiary company $1,120,000 Required:(a) Pass the necessary journal entry to record the acquisition (2 marks)(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 purchase consideration paid was $1,000,000 cash and 400,000 shares each valued at $1.50arrow_forward
- Show the solution in good accounting form Coronation company purchased an entity for 6,000,000 cash on January 31. The book value and fair value of the assets of the acquired entity as of the date of acquisition of follow: Question: What is the good arising from the acquisition? A. 4,450,000 B. 700,000 C. 2,450,000 D. 2,700,000arrow_forward5. On January 1, 20x1, DIAPHANOUS Co. acquired all of the identifiable assets and assumed all of the liabilities of TRANSPARENT, Inc. by paying cash of P4,000,000. On this date, the identifiable assets acquired and liabilities assumed have fair values of P6,400,000 and P3,600,000, respectively. Additional information:In addition to the business combination transaction, the following have also transcribed during the negotiation period: a. After the business combination, TRANSPARENT will enter into liquidation and DIAPHANOUS agreed to reimburse TRANSPARENT for liquidation costs estimated at P80,000. b. DIAPHANOUS agreed to reimburse TRANSPARENT for the appraisal fee of a building included in the identifiable assets acquired. The agreed reimbursement is P40,000.c. DIAPHANOUS entered into an agreement to retain the top management of TRANSPARENT for continuing employment. On acquisition date, DIAPHANOUS agreed to pay the key employees signing bonuses totaling P400,000.d. To persuade, Mr.…arrow_forwardProblem 3) On January 1, 20X7, Falcon acquired the net assets of Intra for $3,400,000 with the issue of shares. The statement of financial position for Intra at the date of acquisition is shown below, together with estimates of the fair values of Intra's recorded assets and liabilities. Intra Corp Statement of Financial Position as at December 31, 20X6 Assets Cash Accounts receivable Inventories Property, plant, and equipment Development projects Other investments Total assets Liabilities Accounts payable and accrued liabilities Long-term debt Common shares Retained earnings Total liabilities and shareholders' equity Book value $ 000's 350 180 330 3,465 150 20 4,495 180 680 1,525 2,110 4,495 Fair value $ 000's 350 170 310 3,155 565 45 180 660 Required: a) What is the amount of goodwill to be recorded for this business combination? b) Prepare the journal entry that Falcon will use to record the business combination. Prepare the statement of financial position for Intra on January 1,…arrow_forward
- Q) The P Ltd acquires all issued capital of the S Ltd for a consideration of $1,000,000 cash and 800,000 shares each valued at $1.50. The summary statement of the financial position of the subsidiary company immediately following the acquisition is:Fair value of assets acquired $2,640,000Fair value of liabilities acquired $720,000Total shareholders’ equity of the subsidiary company $800,000Retained earnings of the subsidiary company $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 purchase consideration paid was $1,000,000 cash and 400,000 shares each valued at $1.50arrow_forwardPuncho Company is acquiring the net assets of Semos Company in exchange for common stock valued at $900,000. The Semos identifiable net assets have book and fair values of $400,000 and $800,000, respectively. Compare accounting for the acquisition (including assignment of the price paid) by Puncho with accounting for the sale by Semos.arrow_forwardAllerton Company acquires all of Deluxe Company’s assets and liabilities for cash on January 1, 2018, and subsequently formally dissolves Deluxe. At the acquisition date, the following book and fair values were available for the Deluxe Company accounts:Prepare Allerton’s entry to record its acquisition of Deluxe in its accounting records assuming the following cash exchange amounts:1. $145,000.2. $110,000.arrow_forward
- If PROMDI Co., a new company would acquire the net assets of CARDO Co and SYANO Co. PROMDI Co will be issuing 30,000 shares to CARDO and 12,000 shares to SYANO. The following is the balance sheet of PROMDI Co, followed by the fair values and additional unpaid costs incurred by PROMDI in the acquisition: REQUIREMENTS:A. GoodwillB. Consolidated Total Assets at the date of acquisitionC. Consolidated Total Liabilities at the date of acquisitionD. Consolidated Equity at the date of acquisitionarrow_forward1. Record the acquisition of Soriano Co. Assume its initial cash payment to the former owners was $741,400. 2. Record the expenses related to the combination. Assume its initial cash payment to the former owners was $741,400. 3. Record the acquisition of Soriano Co. Assume its initial cash payment to the former owners was $861,500. 4. Record the expenses related to the combination. Assume its initial cash payment to the former owners was $861,500.arrow_forwardOn December 31, Year 1, P Company obtains control over the net assets of S Company by purchasing 100% of the ordinary shares of S Company. P Company paid for the purchase by issuing ordinary shares with a fair value of $44,000. In addition, P Company paid $1,000 for professional fees to facilitate the transaction. The following information has been assembled just prior to the acquisition date: Show Transcribed Text Goodwill Plant assets (net) Current assets Shareholders' equity Long-term debt Current liabilities Show Transcribed Text (i) the acquisition method (ii) the new-entity method Carrying Amount $ 80,000 50.000 $130,000 $ 75,000 25,000 30.000 3 $130,000 ü P Company 3 Fair Value $ 38,000 90,000 55,000 $ 183,000 $ 29,000 30,000 Carrying Amount $ 20.000 15,000 $35.000 $18,000 7,000 10,000 S Company $35,000 Fair Value $ 22,000 26,000 14.000 $ 62,000 $ 8,000 10,000 Required (a) Prepare a consolidated statement of financial position for P Company and calculate the debt-to-equity ratio…arrow_forward
- Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning