Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Chapter 10, Problem 10.26P
a.
To determine
Consolidation following acquisition:when a company purchases another company’s common stock, the subsidiary is viewed as being part of the consolidated entity only from the time stock is acquired. When a subsidiary is acquired during a fiscal period rather than at the beginning or at the end, the results of the subsidiary’s operations are included in the consolidated statements only for the portion of the year that the parent owned the stock. The subsidiary’s revenues, expenses, gains and losses for the portion of the fiscal period prior to acquisition is excluded from the consolidated financial statements.
the
b.
To determine
Consolidation following acquisition: when a company purchases another company’s common stock, the subsidiary is viewed as being part of the consolidated entity only from the time stock is acquired. When a subsidiary is acquired during a fiscal period rather than at the beginning or at the end, the results of the subsidiary’s operations are included in the consolidated statements only for the portion of the year that the parent owned the stock. The subsidiary’s revenues, expenses, gains and losses for the portion of the fiscal period prior to acquisition is excluded from the consolidated financial statements.
The consolidation entries for December 31, 20X1.
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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…
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.
On January 2, 20Y7, Mikedes Company acquired 30% of the outstanding stock of Violet Company for $720,000. For the year ended December 31, 20Y7, Violet Company earned income of $190,000 and paid dividends of $40,000. On January 31, 20Y8, Mikedes Company sold all of its investment in Violet Company stock for $770,000.
Required:
Journalize the entries for Mikedes Company for the purchase of the stock, the share of Violet income, the dividends received from Violet Company, and the sale of the Violet Company stock. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
Chapter 10 Solutions
Advanced Financial Accounting
Ch. 10 - Prob. 10.1QCh. 10 - Why are dividend payments to noncontrolling...Ch. 10 - Prob. 10.3QCh. 10 - Why are changes in inventory balances not shown in...Ch. 10 - Prob. 10.5QCh. 10 - How is an increase in inventory included in the...Ch. 10 - What portion of the sales of an acquired company...Ch. 10 - Prob. 10.8QCh. 10 - Prob. 10.9QCh. 10 - Prob. 10.10Q
Ch. 10 - Prob. 10.11QCh. 10 - Prob. 10.12QCh. 10 - Prob. 10.13QCh. 10 - Prob. 10.14QCh. 10 - How do interperiod income tax allocation...Ch. 10 - How does the use of interperiod tax allocation...Ch. 10 - Prob. 10.17QCh. 10 - Prob. 10.18QCh. 10 - Prob. 10.19QCh. 10 - When a subsidiary’s convertible bond is treated as...Ch. 10 - Prob. 10.21QCh. 10 - What effect does the presence of a noncontrolling...Ch. 10 - Prob. 10.3CCh. 10 - Consolidated Cash Flows Analysis The consolidated...Ch. 10 - Prob. 10.1ECh. 10 - Prob. 10.2ECh. 10 - Prob. 10.3ECh. 10 - Prob. 10.4ECh. 10 - Prob. 10.5ECh. 10 - Direct Method Cash Flow Statement Using the data...Ch. 10 - Prob. 10.7ECh. 10 - Prob. 10.8ECh. 10 - Prob. 10.9ECh. 10 - Prob. 10.10ECh. 10 - Prob. 10.11ECh. 10 - Prob. 10.12ECh. 10 - Prob. 10.13ECh. 10 - Prob. 10.14ECh. 10 - Effect of Convertible Bonds on Earnings per Share...Ch. 10 - Effect of Convertible Preferred Stock on Earnings...Ch. 10 - Prob. 10.17PCh. 10 - Prob. 10.18PCh. 10 - Preparing a Statement of Cash Flows—Direct Method...Ch. 10 - Prob. 10.20PCh. 10 - Prob. 10.21PCh. 10 - Prob. 10.22PCh. 10 - Prob. 10.23PCh. 10 - Prob. 10.24PCh. 10 - Prob. 10.25PCh. 10 - Prob. 10.26PCh. 10 - Prob. 10.27PCh. 10 - Prob. 10.28PCh. 10 - Prob. 10.29PCh. 10 - Prob. 10.30PCh. 10 - Prob. 10.31PCh. 10 - Prob. 10.32PCh. 10 - Prob. 10.33P
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