Concept explainers
a.
Concept Introduction:
Consolidation of Statements:
In today’s world of business acquisition of smaller companies is common and such acquisitions helps in the growth of the parent company. Once a company acquires another company the net assets of the other company is recorded in the books of the parent company. Consolidation of financial statements of both the parent company and subsidiary company is important for the stockholders of the parent company. A parent company may choose any of the two basic methods for consolidation and they are the equity method or cost method. The accounting methods used by a parent company for consolidation is purely based on their convenience.
Amortization:
Amortization is same as
Consolidated net income for 2015.
b.
Concept Introduction:
Consolidation of Statements:
In today’s world of business acquisition of smaller companies is common and such acquisitions helps in the growth of the parent company. Once a company acquires another company the net assets of the other company is recorded in the books of the parent company. Consolidation of financial statements of both the parent company and subsidiary company is important for the stockholders of the parent company. A parent company may choose any of the two basic methods for consolidation and they are the equity method or cost method. The accounting methods used by a parent company for consolidation is purely based on their convenience.
Amortization:
Amortization is same as depreciation, but it is used for intangible assets like patents, franchise, goodwill, trademark etc. The cost of the intangible assets is allocated to expense over its useful life. This technique is called amortization.
Non-controlling share of income for 2015.
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Advanced Accounting
- On January 1, 2017, Parent Company purchased 80% of Subsidiary Company's stock for P975,000. On this date, the carrying amount of Subsidiary Company's net assets were P1,000,000. The fair value of Subsidiary Company's identifiable assets and liabilities were the same as their carrying amount except for plant assets (net) which were P100,000 in excess of the carrying amount. For the year ended, Subsidiary Company had a net income of P190,000 and paid cash dividends totaling P125,000. Parent opted to measure NCI proportionate to its share on subsidiary's identifiable net assets. In the January 1, 2017 consolidated balance sheet, goodwill should be reported at:arrow_forwarda) Liala Ltd acquired all the issued shares of Jordan Ltd on 1 January 2015. The following transactions occurred between the two entities: • On 1 June 2016, Liala Ltd sold inventory to Jordan Ltd for $12,000, this inventory previously costed Liala Ltd $10,000. By 30 June 2016, Jordan Ltd had sold 20% of this inventory to other entities for $3,000. The other 80% was all sold to external entities by 30 June 2017 for $13,000. During the 2016–17 period, Jordan Ltd sold inventory to Liala Ltd for $6,000, this being at cost plus 20% mark-up. Of this inventory, 20 % remained on hand in Liala Ltd at 30 June 2017. The tax rate is 30%. Required: (i) Prepare the consolidation worksheet entries for Liala Ltd at 30 June 2017 in relation to the intragroup transfers of inventory. I (ii) Compute the amount of cost of goods sold to be reported in the consolidated income statement for 2017 relating to the relevant intra-group sales. b) On 1 July 2016, Liala Itd sold an item of plant to Jordan Ltd Ltd…arrow_forwardPython acquired 75% of Slither’s stock for $316 million in cash on January 2, 2015. The fair value of the noncontrolling interest in Slither was $89 million. Slither’s book value at that time was $120 million. The assets and liabilities reported on Slither’s balance sheet had balances that approximated fair value at the date of acquisition. However, Slither had previously unreported developed technology (10 year life, straight-line), valued at $40 million. There has been no impairment loss on the developed technology since acquisition. Goodwill was impaired $6 million in 2015, and a $3 million impairment loss should be recorded for 2016. It is now December 31, 2016. The trial balances of Python and Slither appear below. (in thousands) Python Dr (Cr) Slither Dr (Cr) Current assets $ 113,500 $ 35,000 Plant assets, net 1,200,000 500,000 Investment in Slither 323,800 – Liabilities (1,342,950) (387,000) Capital stock (40,000) (20,000) Retained earnings, Jan. 1 (215,000) (110,000)…arrow_forward
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