Concept explainers
Business combination:
Business combination refers tothe 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
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To prepare: Consolidated worksheet for Company A and Company Tfor the year ended December 31, 2016 along with the determination and distribution of excess schedule.
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Advanced Accounting
- The following data will be used to answer Questions 5-8. It will be repeated in each question. It is January 1, 2017 and Pegasus is contemplating the acquisition of competitor Chimera. The following details are available ($ in millions except per share data): January 1, 2017 ($ in millions) Pegasus Chimera GAAP revenue $150.40 $112.00 GAAP net income $14.04 $9.92 Tax rate 40% 35% What is 2017 pro forma (combined) GAAP pre-tax income? O 9.09 O 21.66 O 36.86 O 38.66 O 39.93arrow_forwardOn January 1 2013, Ahmed Company purchased 90,000 of the 100,000 outstanding shares of common stock of Singer Company as a longer-term investment. The purchase price of OMR 4,850,000 was paid in cash. Additional data on Singer Company for the four years following the purchase are 2013 2014 2015 2016 Net Income (loss) 1,800,000 700,000 (320,000) (260,000) Cash dividends paid, 12/30 500,000 500,000 500,000 500,000 Required: Prepare journal entries under each of the following methods to record the purchase and all investment-related subsequent events on the books of Ahmed Company for the four years. Ahmed uses the cost method to account for its investment in Singer. Ahmed uses the partial equity method to account for its investment Singer.arrow_forwardThe following information relates to Crip Crippy Investment of HIJ Corporation. (1). Purchase investment for $1,000,000 on January 1, 2009 (2) HIJ Corporation had earnings of $600,00 at December 31, 2009 and declared dividends of $400,000. (3) The dividends were paid on January 2, 2010. (4) On July 1, 2010 Crip Crippy sold fifty percent of its interest for $ 400,000 (5) At June 30, 2010, HIJ had earnings of $600,000 for the year and paid dividends of $200,000 for shares outstanding as at November 30, 2010. Requiement: Using the cost and equity method, record all entries from January 1, 2009 to December 31, 2010 using the following scenarios (a) Crip Crippy purchased 40% of HIJ Corporation (b) Crip Crippy purchased 18% of HIJ Corporationarrow_forward
- Use the following data to answer this question. It is January 1, 2017 and Pegasus is contemplating the acquisition of competitor Chimera. The following details are available ($ in millions except per share data): January 1, 2017 ($ in millions) Pegasus Chimera GAAP revenue $150.40 $112.00 GAAP net income $14.04 $9.92 Tax rate 40% 35% Assume all activities below occur on January 1, 2017: You also obtained the following transaction-related data: Offer value Sources of funds Refinanced debt Transaction fees Financing fees Cost synergies Revenue synergies Goodwill Asset write ups What is the sum of all acquisition adjustments pertaining to the Acquisition Financing, needed to calculate 2017 pro forma (combined) GAAP pre-tax income? Hint: There will be three components - lost interest income, interest from new debt (acquisition debt & Chimera debt), and reduced Chimera debt interest. O 21.66 O -3.10 O -3.96 O -4.01 $132.0 million in cash 50% of the offer value funded using Pegasus's cash…arrow_forward.During 2012 Logic Company purchased 4,000 shares of Midi, Inc. for P30 per share. The investment was classified as a trading investment. During the year Logic Company sold 1,000 shares of Midi, Inc. for P35 per share. At December 31, 2012 the market price of Midi, Inc.’s shares was P28 per share. What is the total amount of gain/(loss) that Logic Company will report in its income statement for the year ended December 31, 2012 related to its investment in Midi, Inc. shares? a. (P8,000) b. P5,000 c. (P3,000) d. (P1,000)arrow_forwardOn July 1, 2015, Cleopatra Corporation acquired 25% of the shares of Marcus, Inc. for P1,000,000. At that date, the equity of Marcus was P4,000,000, with all the identifiable assets and liabilities being measured at amounts equal to fair value. The table below shows the profits and losses made by Marcus during 2015 to 2019: Year Profit (Loss) 2015 200,000 2016 2,000,000 2017 2,500,000 2018 160,000 2019 300,000 How much will the Investment in Associate account be debited/credited in 2018? a. P1,035,000 Cr. b. No entry c. P40,000 Dr. d. P1,060,000 Cr.arrow_forward
- On July 1, 2015, Cleopatra Corporation acquired 25% of the shares of Marcus, Inc. for P1,000,000. At that date, the equity of Marcus was P4,000,000, with all the identifiable assets and liabilities being measured at amounts equal to fair value. The table below shows the profits and losses made by Marcus during 2015 to 2019: Year Profit (Loss) 2015 200,000 2016 2,000,000 2017 2,500,000 2018 160,000 2019 300,000 How much will the Investment in Associate account be debited/credited in 2018? P1,035,000 Cr. P1,060,000 Cr. P40,000 Dr. No entry How much will the Investment in Associate account be debited/credited in 2019? P960,000 Cr. No Entry P15,000 Dr. P75,000 Dr.arrow_forwardSutton Company purchased 10% of the outstanding stock of Roberts Company on January 1, 2012. Roberts reported net income of $155,000 and declared dividends of $40,000 during 2012. How would these events be reported by Sutton using the cost method?arrow_forward(Fair Value Measurement) Presented below is information related to the purchases of common stock by Lilly Company during 2017. Cost (at purchase date) Fair Value(at December 31) Investment in Arroyo Company stock $100,000 $ 80,000 Investment in Lee Corporation stock 250,000 300,000 Investment in Woods Inc. stock 180,000 190,000 Total $530,000 $570,000 Instructions(Assume a zero balance for any Fair Value Adjustment account.)(a) What entry would Lilly make at December 31, 2017, to record the investment in Arroyo Company stock if it chooses to report this security using the fair value option?(b) What entry(ies) would Lilly make at December 31, 2017, to record the investments in the Lee and Woods corporations, assuming that Lilly did not select the fair value option for these investments?arrow_forward
- Refer to the preceding facts for Panther’s acquisition of Sandin common stock. On January 1, 2016, Sandin held merchandise sold to it from Panther for $20,000. During 2016, Panther sold merchandise to Sandin for $100,000. On December 31, 2016, Sandin held $25,000 of this merchandise in its inventory. Panther has a gross profit of 30%. Sandin owed Panther $15,000 on December 31 as a result of this intercompany sale. On January 1, 2015, Sandin sold equipment to Panther at a profit of $24,000. Panther also sold some fixed assets to nonaffiliates. Depreciation is computed over a 6-year life, using the straight-line method. 1. Prepare a value analysis and a determination and distribution of excess schedule for the investment in Sandin. 2. Complete a consolidated worksheet for Panther Company and its subsidiary Sandin Company as of December 31, 2016. Prepare supporting amortization and income distribution schedules.arrow_forwardThe Donahoo Western Furnishings Company was formed onDecember 31, 2014, with $1,000,000 in equity plus $500,000in long-term debt. On January 1, 2015, all of the firm’s capitalwas held in cash. The following transactions occurred duringJanuary 2015:• January 2: Donahoo purchased $1,000,000 worth of furniturefor resale. It paid $500,000 in cash and financed the balanceusing trade credit that required payment in 60 days.• January 3: Donahoo sold $250,000 worth of furniture that ithad paid $200,000 to acquire. The entire sale was on creditterms of net 90 days.• January 15: Donahoo purchased more furniture for $200,000.This time, it used trade credit for the entire amount of thepurchase, with credit terms of net 60 days.• January 31: Donahoo sold $500,000 worth of furniture,for which it had paid $400,000. The furniture was soldfor 10 percent cash down, with the remainder payablein 90 days. In addition, the firm paid a cash dividend of$100,000 to its stockholders and paid off $250,000 of…arrow_forwardOn January 1, 2013, K Company purchased a 30 % interest in P Company for $250,000. P reported net income of $100,000 for 2013 and declared and paid a dividend $10,000. K accounts for investment using the equity method. In December 31, 2013,balance sheet, what amount should K report as its investment in P? Select one: a. 277,000 b. 223,000 c. 160,000 d. 340,000arrow_forward
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT