Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 4, Problem 4.1.1C
To determine
Concept Introduction:
Business combination:
Business combination refers to the combining of one or more business organizations in a single entity. The business combination leads to the formation of combined financial statements. After business combination, the entities having separate control merges into one having control over all the assets and liabilities. Merging and acquisition are types of business combinations.
Consolidated financial statements:
The consolidated financial statements refer to the combined financial statements of the entities which are prepared at the year-end. The consolidated financial statements are prepared when one organization is either acquired by the other entity or two organizations merged to form the new entity. The consolidated financial statements serve the purpose of both the entities about financial information.
To write: A memo to Mr. H suggesting how he might respond to the comments of the president.
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P Company acquired an 80% interest in S Company on January 1, 2011, for an amount equal to book value. S Company sold land to P Company in 2011 at a profit of P5,000. The land is held by the buying affiliate firm until 2013, when it is sold to an unaffiliated party for a profit of P6,000. S Company reported net income for 2011, 2012, and 2013 of P30,000, P40,000 and P50,000, respectively.
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On September 1, 2015, Parcel Corporation purchased 80% of the outstanding common stock of Sack Corporation for $152,000. On that date, Sack’s net book values equaled fair values, and there was no excess of cost or book value resulting from the purchase. Parcel has been maintaining its investment under the simple equity method.Over the next three years, the intercompany transactions between the companies were as follows:a. On September 1, 2015, Sack sold its 4-year-old delivery truck to Parcel for $14,000 in cash. At that time, Sack had depreciated the truck, which had cost $15,000, to its $5,000 salvage value. Parcel estimated on the date of the sale that the asset had a remaining useful life of three years and no salvage value.b. On September 1, 2016, Parcel sold equipment to Sack for $103,000. Parcel originally paid $80,000 for the equipment and planned to depreciate it over 20 years, assuming no salvage value. However, Parcel had the property for only 10 years and carried it at a…
On January 1, 2011, Jordan Inc. acquired 30% of Nico Corp. Jordan used the equity method to account for the investment. On January 1, 2012, Jordan sold two-thirds of its investment in Nico. It no longer had the ability to exercise significant influence over the operations of Nico. How should Jordan have accounted for this change?
Multiple Choice
Jordan should restate the prior years' financial statements and change the balance in the investment account as if the fair-value method had been used since 2011.
Jordan should report the effect of the change from the equity to the fair-value method as a retrospective change in accounting principle.
Jordan should continue to use the equity method to maintain consistency in its financial statements.
Jordan has the option of using either the equity method or the fair-value method for 2011 and future years.
Jordan should use the fair-value method for 2012 and future years but should not make a retrospective adjustment to the investment account.
Chapter 4 Solutions
Advanced Accounting
Ch. 4 - Prob. 1UTICh. 4 - Prob. 2UTICh. 4 - Prob. 3UTICh. 4 - Prob. 4UTICh. 4 - Prob. 5UTICh. 4 - Prob. 6UTICh. 4 - Sorel is an 80%-owned subsidiary of Pattern...Ch. 4 - Hide Corporation is a wholly owned subsidiary of...Ch. 4 - Prob. 2.2ECh. 4 - Prob. 3E
Ch. 4 - On January 1, 2016, Jungle Company sold a machine...Ch. 4 - Prob. 4.2ECh. 4 - Prob. 4.3ECh. 4 - Prob. 5.1ECh. 4 - Prob. 5.2ECh. 4 - Prob. 6ECh. 4 - Prob. 7ECh. 4 - Prob. 8ECh. 4 - Prob. 9.1ECh. 4 - Prob. 9.2ECh. 4 - Prob. 10.1ECh. 4 - Prob. 10.2ECh. 4 - Prob. 4.1PCh. 4 - Prob. 4.2.1PCh. 4 - Prob. 4.2.2PCh. 4 - Prob. 4.3.1PCh. 4 - Prob. 4.3.2PCh. 4 - Prob. 4.4.1PCh. 4 - Prob. 4.4.2PCh. 4 - Prob. 4.7.1PCh. 4 - Prob. 4.7.2PCh. 4 - Prob. 4.8.1PCh. 4 - Prob. 4.8.2PCh. 4 - OnJanuary 1, 2015, Peanut Company acquired 80% of...Ch. 4 - Prob. 4.11PCh. 4 - Prob. 4.13.1PCh. 4 - Prob. 4.13.2PCh. 4 - Prob. 4.14.1PCh. 4 - Prob. 4.14.2PCh. 4 - Prob. 4A.1APCh. 4 - Prob. 4A.2APCh. 4 - Prob. 4.1.1C
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