Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 1, Problem 1.8P
To determine
Introduction: Acquisition is a corporate term used to represent purchase of another company and gaining the ownership of the company.
Whether it is gain on acquisition or
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At January 1, 2016, Transit Developments owed First City Bank Group $600,000, under an 11% note with three years remaining to maturity. Due to financial difficulties, Transit was unable to pay the previous year’s interest. First City Bank Group agreed to settle Transit’s debt in exchange for land having a fair value of $450,000. Transit purchased the land in 2012 for $325,000. Required: Prepare the journal entry(s) to record the restructuring of the debt by Transit Developments.
At January 1, 2018, Transit Developments owed First City Bank Group $600,000, under an 11% note with threeyears remaining to maturity. Due to financial difficulties, Transit was unable to pay the previous year’s interest.First City Bank Group agreed to settle Transit’s debt in exchange for land having a fair value of $450,000.Transit purchased the land in 2014 for $325,000.Required:Prepare the journal entry(s) to record the restructuring of the debt by Transit Developments.
On June 30, 2018, Streeter Company reported the following account balances:On June 30, 2018, Princeton Company paid $310,800 cash for all assets and liabilities of Streeter, which will cease to exist as a separate entity. In connection with the acquisition, Princeton paid $15,100 in legal fees. Princeton also agreed to pay $55,600 to the former owners of Streeter contingent on meeting certain revenue goals during 2019. Princeton estimated the present value of its probability adjusted expected payment for the contingency at $17,900.In determining its offer, Princeton noted the following pertaining to Streeter:• It holds a building with a fair value $43,100 more than its book value.• It has developed a customer list appraised at $25,200, although it is not recorded in its financial records.• It has research and development activity in process with an appraised fair value of $36,400. However, the project has not yet reached technological feasibility and the assets used in the activity…
Chapter 1 Solutions
Advanced Accounting
Ch. 1 - Prob. 1UTICh. 1 - Prob. 3UTICh. 1 - Prob. 4UTICh. 1 - Prob. 5UTICh. 1 - Prob. 6UTICh. 1 - Prob. 7UTICh. 1 - Prob. 8UTICh. 1 - Prob. 9UTICh. 1 - Prob. 10UTICh. 1 - Prob. 1.1E
Ch. 1 - Prob. 1.2ECh. 1 - Prob. 1.3ECh. 1 - Prob. 2ECh. 1 - Prob. 5.1ECh. 1 - Prob. 5.2ECh. 1 - Prob. 6ECh. 1 - Lake craft Company has the following balance...Ch. 1 - Prob. 8.2ECh. 1 - Prob. 8.3ECh. 1 - Prob. 9.1ECh. 1 - Prob. 9.2ECh. 1 - Prob. 1A.1.1AECh. 1 - Prob. 1A.1.2AECh. 1 - Prob. 1.2PCh. 1 - Prob. 1.3.1PCh. 1 - Prob. 1.4PCh. 1 - Jack Company is a Corporation that was organized...Ch. 1 - Prob. 1.6PCh. 1 - Prob. 1.7.1PCh. 1 - Prob. 1.7.2PCh. 1 - Prob. 1.8PCh. 1 - Prob. 1.10.A1PCh. 1 - Prob. 1.11PCh. 1 - Prob. 1.12PCh. 1 - Prob. 1.13.2PCh. 1 - Prob. 1A.1.1APCh. 1 - Prob. 1A.1.2APCh. 1 - (Note: The use 01 a financial calculator or Excel...Ch. 1 - Frontier does not have publicly traded stock. You...Ch. 1 - Frontier does not have publicly traded stock. You...Ch. 1 - Prob. 1.1B.3CCh. 1 - Prob. 1.1CCCh. 1 - Prob. 1.2.1CCh. 1 - Prob. 1.2.2CCh. 1 - Case 1-2 Disney Acquires Marvel Entertainment On...
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- Florida LLC owns and operates Bay Hotel in Tampa Florida. In July of year 20X5 Florida LLC entered into a sale agreement with ABC LLC, to sell the property to ABC for $39 million. ABC paid $9 million at the time the agreement was signed as a deposit and to be applied to the final purchase price. ABC LLC had two years to complete the purchase. In year 20X7 ABC LLC notified Florida LLC that it could not obtain the balance of the financing and it forfeited the total sum of the deposit. How should Florida LLC treat the $9 million on its tax return. (note in 20X4 Florida had a section §1231 Loss of $1.5 million) Under section § 1231 recapture, 20X4 had a loss of $1,500,000 could that be treated as ordinary income and $7,500,000 could be subject to capital gains tax?arrow_forwardMorgan Company has recently bought all the trade, assets and liabilities of Hogan Corporation. As part of the take over, all of the combined business’s activities have been relocated at Morgan’s main site. As a result Hogan’s premises are now empty. However, just before the acquisition Hogan had signed a 3-year lease for their premises at P6,000 per month. At December 31, 2020 this lease had 32 months left to run and the landlord had refused to terminate the lease. A sub-tenant had taken over part of the premises for the rest of the lease at a rent of P2,500 per month. What amount of provision on the above onerous contract should Hogan recognize in the December 31, 2020 financial statements?arrow_forwardAt January 1, 2021, Transit Developments owed First City Bank Group $600,000, under an 11% note with three years remaining to maturity. Due to financial difficulties, Transit was unable to pay the previous year’s interest. First City Bank Group agreed to settle Transit’s debt in exchange for land having a fair value of $450,000. Transit purchased the land in 2017 for $325,000.Required:Prepare the journal entry(s) to record the restructuring of the debt by Transit Developments.arrow_forward
- In January 1, 2015, Fun company purchased Company A for $40,000 in cash and paid immediately. Fun company assumed all of Company A's assets and assumed Company A's liabilities. company A has assets valued at $60,000 and liabilities valued at $50,000. question:suppose fun company estimates that company A will only be useful to them for 10 years. What is the annual amortization expense for the goodwill of company Z?arrow_forwardOn January 1, two years ago, Parkway Corporation purchased all of the outstanding common stock of Shaw Company for $220,000 cash. On that date, Shaw's net assets had a book value of $148,000. Equipment with an 8-year life was undervalued by $20,000 in Shaw's financial records. Shaw has a database that is valued at $52,000 and will be amortized over ten years. Shaw reported net income of $25,000 in the year of acquisition and $32,500 in the following year. Dividends of $2,500 were declared and paid in each of those two years. The third year of operations is now complete. For each of the two companies, selected account balances as of December 31 for this third year are as follows: Revenues Expenses Equipment (net) Retained Earnings, beginning of the year Dividend Paid A. B. C. D. E. Parkway Shaw $ 250,000 $ 142,500 For each of the three methods discussed in the chapter, what should be the Investment in Shaw Company account balance in the records of Parkway Corporation at December 31 of…arrow_forwardOn June 1, 2018, Starlet Company approved a plan to dispose of a business segment. It is expected that the sale will occur on April 30, 2019. On December 31, 2018, the carrying value of net assets was $400,000 and the net recoverable amount was $360,000. During 2018, the company paid employees severance and relocation costs of $20,000 as a direct result of the discontinuing operation. The revenue and expenses of the disconinuing segment during 2018 were: Revenues Expenses January 1 - May 31 300, 000 400,000 June 1 - December 31 140,000 180,000 Income tax rate is 35% How much will be reported as loss from discontinued operation during 2018?arrow_forward
- On January 1, 2017, Server Company purchased a machine with an expected economic life of five years. On January 1, 2019, Server sold the machine to Patron Corporation and recorded the following entry: Cash 45,000 Accumulated Depreciation 28,000, Machine 70,000, Gain on Sale of Equipment 3,000. Patron Corporation holds 75 percent of server's voring shares.Server reported a net income of $50,000, and Patron reported income from its own operations of 100,000 for 2019/. There is no change in the economic life of the equipement as a result of the intercorporate tranfer. Based on the preceding information, in the preparation of the 2019 consolidated balance sheet, the machine will be : Debited for 25,000, Credited for 45,000, debited for 1,000, debited for 15,000arrow_forwardHelen Company's directors decided on November 1, 2011 to restructure the entity's operations as follows: Factory A would be closed down and put on the market for sale. Employees working in Factory A would be retrenched on November 30, 2011, and would be paid their accumulated entitlements plus six months' wages. Some employees working in Factory A would be transferred to Factory B, which would continue operating. On December 31, 2011, the following transactions and events had occurred: The retrenched employees have left and their accumulated entitlements have been paid. However, an amount of P1,000,000, representing a portion of the six months' wages for the retrenched employees, has still not been paid. Costs of P300,000 are expected to be incurred in transferring the remaining employees to their new work in Factory B. The transfer is planned for January 15, 2012. One employee, Juan Cruz, remains in order to complete administrative tasks relating to the closure of Factory A and the…arrow_forwardBarkley Corp. obtained a trade name in January 2016, incurring legal costs of $72,000. The company amortizes the trade name over 8 years. Barkley successfully defended its trade name in January 2017, incurring $19,600 in legal fees. At the beginning of 2018, based on new marketing research, Barkley determines that the fair value of the trade name is $60,000. Estimated undiscounted future cash flows from the trade name are $64,000 on January 4, 2018. On January 4, 2018, what should be recognized as the impairment loss? A) $6,800 B) $10,800 C) $11,150 D) $19,800 E) No impairment lossarrow_forward
- Pumpkin Company is going through bankruptcy reorganization. It has a $200,000 note payable incurred prior to the order for relief. The company believes that the note will be settled for $60,000 in cash. It is also possible that the creditor will instead take a piece of land that cost the company $50,000 but is valued at $72,000. On a balance sheet prepared during the reorganization period, how will this debt be reported?arrow_forwardFor the year ended December 31, 2018, Carla Vista Ltd. had the following transactions related to the purchase of property. Assume all transactions are for cash unless otherwise stated. Feb. 7 Purchased real estate for $ 1 million, paying $ 292,700 cash and signing a mortgage payable for the balance. The site had an old building on it and the current values of the land and building were $ 0.9 million and $ 101,400, respectively. The old building will be demolished and a new apartment building will be constructed on the site. 9 Paid legal fees of $ 20,080 on the real estate purchase of February 7. 15 Paid $ 61,670 to demolish the old building and make the land ready for the construction of the apartment building. 16 Received $ 15,880 from the sale of material from the demolished building. 28 Paid $4,000 to grade the land in preparation for the construction of the apartment building. Mar. 2 Paid architect fees of $ 67,570 to design the apartment building. July 2 The full cost for…arrow_forward(Settlement of Debt) Strickland Company owes $200,000 plus $18,000 of accrued interest to Moran State Bank. The debt is a 10-year, 10% note. During 2017, Strickland’s business deteriorated due to a faltering regional economy. On December 31, 2017, Moran State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $390,000, accumulated depreciation of $221,000, and a fair value of $180,000.Instructions(a) Prepare journal entries for Strickland Company and Moran State Bank to record this debt settlement.(b) How should Strickland report the gain or loss on the disposition of machine and on restructuring of debt in its 2017 income statement?(c) Assume that, instead of transferring the machine, Strickland decides to grant 15,000 shares of its common stock ($10 par) which has a fair value of $180,000 in full settlement of the loan obligation. If Moran State Bank treats Strickland’s stock as a trading investment, prepare the entries to record the…arrow_forward
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