Advanced Financial Accounting
11th Edition
ISBN: 9780078025877
Author: Theodore E. Christensen, David M Cottrell, Cassy JH Budd Advanced Financial Accounting
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 7, Problem 7.4E
To determine
Concept Introduction:
The intercompany transactions occur when the unit of legal entity is having transactions with another unit of the similar entity. This transaction can be divided into two categories such as direct and indirect intercompany transfer. The direct transfer occurs when there is transfer between the different units of the same entity and indirect transfer occurs when the unit of entity acquires debt or assets issued to unrelated entity through another unit of the same entity. This type of transfer will help the entity in improving the flow of finance and asset in efficient manner.
Requirement 1
The change in the amount of net income when intercompany services are eliminated in preparing the consolidated statement.
To determine
Concept Introduction:
The intercompany transactions occur when the unit of legal entity is having transactions with another unit of the similar entity. This transaction can be divided into two categories such as direct and indirect intercompany transfer. The direct transfer occurs when there is transfer between the different units of the same entity and indirect transfer occurs when the unit of entity acquires debt or assets issued to unrelated entity through another unit of the same entity. This type of transfer will help the entity in improving the flow of finance and asset in efficient manner.
Requirement 2
The impact of eliminating the intercompany service on the consolidated net income when entity is owing 100% of the other entity.
To determine
Concept Introduction:
The intercompany transactions occur when the unit of legal entity is having transactions with another unit of the similar entity. This transaction can be divided into two categories such as direct and indirect intercompany transfer. The direct transfer occurs when there is transfer between the different units of the same entity and indirect transfer occurs when the unit of entity acquires debt or assets issued to unrelated entity through another unit of the same entity. This type of transfer will help the entity in improving the flow of finance and asset in efficient manner.
Requirement 3
We have to determine the cost of providing health care services to its own employees..
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
On July 1, Zamora Inc. agreed to sell the assets of its Golfright Division to Benito Inc. for $71 million.
The following additional facts pertain to the transaction:
• The Golfrignt Division qualifies as a component of the entity according to GAAP regarding discontinued operations.
• The book value of the Golfright's assets totaled $45 million on the date of the sale.
Golfright's operating income was a pre-tax loss of $160 million in 2020.
• Zamora's income tax rate is 40%.
Suppose that the Golfright Division's assets had not been sold by December 31, 2020, but were considered held for sale. Assume that the fair value
of these assets at December 31 was $71 million.
Calculate the amount of loss from discontinued operations Zamora Inc. will report in the income statement for 2020. (Please input answer without the
millions, i.e. 100 million would be entered as 100)
Jazz Corporation receives management consulting services from its 90 percent owned subsidiary, Laker Inc. During 20X7, Jazz paid Laker $70,000 for its services. Laker's labor cost and other associated costs for the employees providing services to Jazz totaled $10,000 in 20X7. Jazz reported $450,000 of income from its own separate operations for 20X7, and Laker reported net income of $50,000.
Based on the preceding information, what amount of income should be reported as consolidated income on the 20X7 Consolidated Financial Statements?
$440,000
$470,000
$430,000
$500,000
Mani Ltd owns all the shares in Hani Ltd. On 1 March 2021, Mani Ltd sold inventories that cost $50,000 to Hani Lid for $SE.000. At the end of the financial year, beingjune 24
quarter of the inventories were sold by Hani Ltd to entities external to the group.
In relation to this intragroup transaction, which of the following statement is correct?
O Consolidated sales to be eliminated by $50,000
O Consolidated sales to be added by $58,000
O Consolidated profit to be oliminated by $6,000
O Consolidated profit to be eliminated by $8,000
Chapter 7 Solutions
Advanced Financial Accounting
Ch. 7 - Prob. 7.1QCh. 7 - Prob. 7.2QCh. 7 - Prob. 7.3QCh. 7 - Prob. 7.4QCh. 7 - Prob. 7.5QCh. 7 - Prob. 7.6QCh. 7 - Prob. 7.7QCh. 7 - Prob. 7.8QCh. 7 - Prob. 7.9QCh. 7 - Prob. 7.10Q
Ch. 7 - Prob. 7.11QCh. 7 - Prob. 7.12QCh. 7 - Prob. 7.13QCh. 7 - Prob. 7.14QCh. 7 - Prob. 7.15QCh. 7 - Prob. 7.16QCh. 7 - Prob. 7.17QCh. 7 - Prob. 7.18AQCh. 7 - Prob. 7.1CCh. 7 - Prob. 7.2CCh. 7 - Prob. 7.3CCh. 7 - Prob. 7.4CCh. 7 - Prob. 7.5CCh. 7 - Prob. 7.1.1ECh. 7 - Prob. 7.1.2ECh. 7 - Prob. 7.1.3ECh. 7 - Prob. 7.1.4ECh. 7 - Prob. 7.1.5ECh. 7 - Prob. 7.2.1ECh. 7 - Prob. 7.2.2ECh. 7 - Prob. 7.2.3ECh. 7 - Prob. 7.2.4ECh. 7 - Prob. 7.2.5ECh. 7 - Prob. 7.2.6ECh. 7 - Prob. 7.3ECh. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Prob. 7.6ECh. 7 - Prob. 7.7ECh. 7 - Prob. 7.8ECh. 7 - Prob. 7.9ECh. 7 - Prob. 7.10ECh. 7 - Prob. 7.11ECh. 7 - Prob. 7.12ECh. 7 - Prob. 7.13ECh. 7 - Prob. 7.14ECh. 7 - Prob. 7.15ECh. 7 - Prob. 7.16ECh. 7 - Prob. 7.17ECh. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.20ECh. 7 - Prob. 7.21ECh. 7 - Prob. 7.22ECh. 7 - Prob. 7.23AECh. 7 - Computation of Consolidated Net Income Petime...Ch. 7 - Prob. 7.25PCh. 7 - Prob. 7.26PCh. 7 - Prob. 7.27PCh. 7 - Prob. 7.28.1PCh. 7 - Prob. 7.28.2PCh. 7 - Prob. 7.28.3PCh. 7 - Prob. 7.28.4PCh. 7 - Prob. 7.29PCh. 7 - Prob. 7.30PCh. 7 - Prob. 7.31PCh. 7 - Prob. 7.32PCh. 7 - Prob. 7.33PCh. 7 - Prob. 7.34PCh. 7 - Prob. 7.35PCh. 7 - Prob. 7.36PCh. 7 - Prob. 7.37PCh. 7 - Prob. 7.38PCh. 7 - Prob. 7.39APCh. 7 - Prob. 7.40APCh. 7 - Modified Equity Method Using the data in P7-33, on...Ch. 7 - Prob. 7.42AP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Problems 12 and 13 relate to the following:On May 1, Donovan Company reported the following account balances:On May 1, Beasley paid $400,000 in stock (fair value) for all of the assets and liabilities of Donovan, which will cease to exist as a separate entity. In connection with the merger, Beasley incurred $15,000 in accounts payable for legal and accounting fees.Beasley also agreed to pay $75,000 to the former owners of Donovan contingent on meeting certain revenue goals during the following year. Beasley estimated the present value of its probability adjusted expected payment for the contingency at $20,000. In determining its offer, Beasley noted the following:• Donovan holds a building with a fair value $30,000 more than its book value.• Donovan has developed unpatented technology appraised at $25,000, although is it not recorded in its financial records.• Donovan has a research and development activity in process with an appraised fair value of $45,000. The project has not yet…arrow_forwardobita Corporation has two business segments, Segment A and Segment B. Segment A's business operation is continuing. Segment B met the criteria to be classified as "held for sale". The board of directors was able to dispose this segment (B) on September 1, 2021. Net proceeds from the sale were P20,000,000; while the segments' carrying amount on September 1, 2021 was P18,000,000. The following pertains to the results of the operations of Segment A & B during 2021: Segment A Segment B January 1 - December 31, 2021 January 1 - December 31, 2021 Revenue 25,000,000 2,000,000 Selling and general expenses. 15,000,000 15,000,000 Income tax 35% Problem 1) How much shall be presented as Discontinued operations on the face of the income statement? Problem 2) How much shall be presented as…arrow_forwardPearson company owns 42% of Stadium corporation. Pearson has a basis in the stock of Stadium corporation for $13,000 and in a note recievable from the Stadium corporation of $9,000. Instructions: calculate the basis of the stock, the basis in the note and the amount of the ordinary loss and income that Pearson must report in 2021 and 2022 a. The Stadium corporation has a net operating loss of $46,000 in year 2021. b. The Stadium corporation has net operating income of $17,000 in year 2022. They also made a distribution of $11,000.arrow_forward
- Company S is 80% owned by Company P. Near the end of 2015, Company S sold merchandise with a cost of $6,000 to Company P for $7,000. Company P sold the merchandise to a nonaffiliated firm in 2016 for $10,000. How much total profit should be recorded on the consolidated income statements in 2015 and 2016? How much profit should be awarded to the controlling and noncontrolling interests in 2015 and 2016?arrow_forwardManna Ltd. enters into a business combination with Noah Inc. in which Manna purchases all of the identifiable assets and liabilities of Noah Inc. To effect the business combination, Manna issued 50,000 of its common shares currently trading at $8.00 per share for all of Noah's net identifiable assets. Manna is considered to be the clear acquirer. Costs associated with the business combination are: Legal, appraisal, and finders' fees $5,000 Costs of issuing shares 7,000 $12,000 Balance sheet data for the two companies immediately before the business combination are below: Manna Ltd. Book Value Noah Inc. Book Value Fair Value Cash $ 140,000 $ 52,500 $ 52,500 Accounts Receivable 167,200 61,450 56,200 Inventory 374,120 110,110 134,220 Land 425,000 75,000 210,000 Buildings (at net) 250,505 21,020 24,020 Equipment (at net) 78,945 17,705 15,945 Total Assets $1,435,770 $337,785 Current Liabilities $ 133,335 $ 41,115 $ 41,115 Non-current Liabilities ------------ 150,000 155,000 Common Shares…arrow_forwardWickum Corporation reports under IFRS, and recognized a $500,000 impairment of an HTM debt investment in Right Corporation. Subsequently, the credit loss for Wickum’s investment decreased by $300,000. How would Wickum account for that change?arrow_forward
- During the year ended 30 June 2021, a parent entity rents a warehouse from a subsidiary entity for $200 000. The company tax rate is 30%. Which of the following is the consolidation adjustment entry needed at reporting date to eliminate the transaction? a. Rent revenue Dr 200 000 Rent expense Cr 200 000 b. Rent revenue Dr 200 000 Rent expense Cr 200 000 Income tax expense Dr 60 000 Deferred tax liability Cr 60 000 c. Rent revenue Dr 200 000 Rent expense Cr 200 000 Deferred tax asset Dr 60 000 Income tax expense Cr 60 000 d. Rent expense Dr 200 000 Rent revenue Cr 200 000 Answer (write your correct choice):arrow_forwardGrumpy is a 90%-owned subsidiary of Margot Corporation, acquired at book value several years ago. Comparative separate company income statements for these affiliated corporations for 2019 are as follows: Margot Corporation P 750,000 54,000 15,000 P 819,000 P 500,000 150,000 P 650,000 P 169,000 On January 5, 2019 Margot sold a building with a 10-year remaining useful life to Grumpy as a Grumpy Corporation Sales . P350,000 Dividend income Gain on building . Income credits. Cost of sales. Operating expenses. P350,000 P200,000 75,000 P275,000 P 75,000 Income debits . Net income. of P15,000. Grumpy paid dividends of P60,000 during 2019. The Non-controlling interest in net income for 2016:arrow_forwardPharoah Corporation has income from continuing operations of $278,400 for the year ended December 31, 2025. It also has the following items (before considering income taxes). 1. 2. An unrealized loss of $76,800 on available-for-sale securities. Again of $28,800 on the discontinuance of a division (comprised of a $9,600 loss from operations and a $38,400 gain on disposal). Assume all items are subject to income taxes at a 20% tax rate. Prepare a partial income statement, beginning with income from continuing operations. Income from Continuing Operations Discontinued Operations Gain from Disposal Loss from Operations Net Income/(Loss) Prepare a statement of comprehensive income. Net Income /(Loss) PHAROAH CORPORATION Income Statement (Partial) For the Year Ended December 31, 2025 V Other Comprehensive Income PHAROAH CORPORATION Statement of Comprehensive Income For the Year Ended December 31, 2025 V Unrealized Loss of Available-for-Sale Securities V Comprehensive Income LA $ LA $ 278,400arrow_forward
- On September 17, 2024, Ziltech, Incorporated, entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By December 31, 2024, the company's fiscal year - end, the division had not yet been sold, but was considered held for sale. The net fair value (fair value minus costs to sell) of the division's assets at the end of the year was $10 million. The pretax income from operations of the division during 2024 was $2 million. Pretax income from continuing operations for the year totaled $ 13 million. The income tax rate is 25 %. Ziltech reported net income for the year of $5.1 million. Required: Determine the book value of the division's assets on December 31, 2024.arrow_forwardIdentify how much to add or deduct from the Investment in Associate account of ABC based on the following transactions or events: Jan. 1, 2021 - ABC Bought an additional 15,000 shares of X Corp. for a total price of P3,800,000. The original shares are valued at P250 each. On the same date, ABC started providing essential technical information to X and that both corporations have an interchange of managerial personnel. Significant influence is established. There were no changes in the ordinary shares outstanding.arrow_forwardOn September 17, 2024, Ziltech, Incorporated, entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By December 31, 2024, the company's fiscal year-end, the division had not yet been sold, but was considered held for sale. The net fair value (fair value minus costs to sell) of the division's assets at the end of the year was $11 million. The pretax income from operations of the division during 2024 was $4 million. Pretax income from continuing operations for the year totaled $14 million. The income tax rate is 25%. Ziltech reported net income for the year of $7.2 million. Required: Determine the book value of the division's assets on December 31, 2024. Note: Enter your answer in whole dollars and not in millions. For example, $4,000,000 rather than $4.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
