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.
Value analysis:
The value analysis in a business combination is an essential part of determining the worth of the acquired entity. The
:
Prepare the formal consolidated income statement for the year ended March 31, 2017.
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Advanced Accounting
- If company A acquired 70% of company B on 1/1/16. During 2016 company A made several inventory sales to company B. The cost of goods was $160,000 and sales price of the goods was $250,000. Company B still owned one-third of the inventory at the end of 2016. Consolidated cost of goods sold for 2016 was $3,250,000 due to consolidating adjustments for intra-entity transfers less than intra-entity gross profitin company B ending inventory. How does the consolidated cost of goods sold differ if the inventory transfers had been the same amount and cost for upstream and downstrem? How does the net income attributable to the noncontrolling interest be different in the transfers had been the same amount and cost for upstream and downstream? How does upstream and downstream work?arrow_forwardPlanet Corporation acquired 90 percent of Saturn Company’s voting shares of stock in 20X1. During 20X4, Planet purchased 44,000 Playday doghouses for $33 each and sold 29,000 of them to Saturn for $39 each. Saturn sold all of the doghouses to retail establishments prior to December 31, 20X4, for $54 each. Both companies use perpetual inventory systems. Required: Prepare the journal entries Planet recorded for the purchase of inventory and resale to Saturn Company in 20X4. Prepare the journal entries Saturn recorded for the purchase of inventory and resale to retail establishments in 20X4. Prepare the worksheet consolidation entry(ies) needed in preparing consolidated financial statements for 20X4 to remove all effects of the intercompany sale.arrow_forwardAccounting Woody Ltd sold inventory items to its subsidiary Buzz Lightyear Ltd and had the following intercompany transactions: Cost of inventory $600 000 sold for $750 000 for the year ended 30 June 2022. One third of the inventory items were sold by Buzz Lightyear Ltd to external parties before the financial year end 30 June 2022. Cost of inventory $200 000 sold for $150 000 for the year ended 30 June 2023. Half of the inventory items were sold by Buzz Lightyear Ltd to external parties before the financial year end 30 June 2023. Ignoring taxes, which of the following statements is correct with respect to this transaction only for the year ended 30 June 2023 А. Consolidated sales will decrease by $200 00 В. Consolidated sales will increase by $550 000 C. Consolidated profit will increase by $125 000. D. Consolidated profit will increase by $24 000 B.arrow_forward
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- If P acquired 90% of the outstanding common stock of S company. During 2015, P Company sells merchandise amounted 1800000 to S Company at 20% above cost. S Company had in its inventory half of the amount of goods purchased from P during 2015. If P company uses cost method, what eliminating entry will be recorded by P in 2016 to eliminate the Unrealized Profit in Inventory related to 2015? Select one: a. DR. Cost of goods sold 150000 CR. Inventory (ending) 150000 b. DR. Retained earnings 1/1 900000 CR. Inventory (ending) 900000 c. DR. Retained earnings 1/1 135000, NCI 15000 CR. Cost of goods sold 150000 d. DR. Retained earnings 1/1 150000 CR. Cost of goods sold 150000 e. DR. Retained earnings 1/1 810000, NCI 90000 CR. Cost of goods sold 900000arrow_forwardOn January 2, 2012, Power Company acquired 90% of the outstanding shares of Solar Inc. at book value. During 2012 and 2013, intercompany sales amounted to P2,000,000 and P4,000,000, respectively. Power Company consistently recognized a 25% mark-up based on cost while Solar Inc. had a 25% gross profit on sales. The inventories of the buying affiliate, which all came from inter-company transactions show: Power Solar December 31, 2012 P240,000 100,000 December 31, 2013 P160,000 40,000 On October 1, 2012, Solar Inc. purchased a piece of land costing P1,000,000 from Power Company for P1,500,000. On December 1, 2013, Solar Inc. sold this land to unrelated party for P1,500,000. On the other hand, on July 1, 2013, Solar Inc. sold a used photo-copier with a carrying value of P60,000 and remaining life of 3 years to Power Company for P42,000. Separate Statement of Comprehensive income for the two companies for the year 2013 follow: |Sales Cost of sales Gross Profit Operating expenses Operating…arrow_forwardJack Co. acquired an 80% interest in Gill Co at book value on January 1, 2018. Intercompany purchases and sales and inventory data for 2018, 2019, 2020, and 2021 are as follows: Sale by Gill Co Intercompany Profit in Jack's Inventory at Dec 31 2018 $250,00 $20,000 2019 150,000 12,000 2020 310,000 25,000 Selected data from the financial statements of Jack and Gill at and for the year ended December 31, 2020, are as follows: Jack Gill Income Statement Sales 900,000 600,000 Cost of sales 625,000 300,000 Expenses 225,000…arrow_forward
- Jarvis owns 30% of McLintock. During the year to 31 December 20X4 McLintock sold $2 million of goods to Jarvis, of which 40% were still held in inventory by Jarvis at the year end. McLintock applies a mark-up of 25% on all goods sold. What effect would the above transactions have on group inventory at 31 December 20X4? A Debit group inventory $48,000 B Debit group inventory $160,000 C Credit group inventory $48,000 D No effect on group inventoryarrow_forwardTookey Ltd sold inventory items (with a cost of $75 000) to its parent Milky Ltd for $135 000. One third of the inventory items were sold by Milky Ltd to external parties before the financial year end. Ignoring taxes, which of the following statements is correct with respect to this transaction only? a. Consolidated sales will decrease by $75 000 Ob. Consolidated sales will decrease by $95 000 c. Consolidated profit will decrease by $20 000 d. Consolidated profit will decrease by $40 000 e. Consolidated profit will decrease by $60 000 O Oarrow_forwardOn January 1, 2015, Peanut Company acquired 80% of the common stock ofSalt Company for $200,000. On this date, Salt had total owners’ equity of $200,000 (includingretained earnings of $100,000). During 2015 and 2016, Peanut appropriately accounted for itsinvestment in Salt using the simple equity method. Any excess of cost over book value is attributable to inventory (worth $12,500 more thancost), to equipment (worth $25,000 more than book value), and to goodwill. FIFO is used forinventories. The equipment has a remaining life of four years, and straight-line depreciation isused. On January 1, 2016, Peanut held merchandise acquired from Salt for $20,000. During2016, Salt sold merchandise to Peanut for $40,000, $10,000 of which was still held by Peanuton December 31, 2016. Salt’s usual gross profit is 50%. On January 1, 2015, Peanut sold equipment to Salt at a gain of $15,000. Depreciation isbeing computed using the straight-line method, a 5-year life, and no salvage value.The following…arrow_forward
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