Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 4, Problem 4.4.2P
To determine
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 consolidated worksheet for Company P and Company S for the year ended December 31, 2016.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
. On January 1, 2011, Payne Corp. purchased 70% of Shayne Corp.'s P10 par common stock for P900,000. On this date, the carrying amount of Shayne's net assets was P1,000,000. The fair values of Shayne's identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net), which were P200,000 in excess of the carrying amount. For the year ended December 31, 2011, Shayne had net income of P150,000 and paid cash dividends totaling P90,000. Excess attributable to plant assets is amortized over 10 years.
In the December 31, 2011, consolidated balance sheet, non-controlling interest on a full-fair value basis should be reported at
On January 1, 2016, Phoenix Co. acquired 100 percent of the outstanding voting shares of Sedona Inc. for $662,000 cash. At January 1, 2016, Sedona’s net assets had a total carrying amount of $463,400. Equipment (eight-year remaining life) was undervalued on Sedona’s financial records by $96,000. Any remaining excess fair over book value was attributed to a customer list developed by Sedona (four-year remaining life), but not recorded on its books. Phoenix applies the equity method to account for its investment in Sedona. Each year since the acquisition, Sedona has declared a $20,500 dividend. Sedona recorded net income of $99,500 in 2016 and $110,300 in 2017.
Selected account balances from the two companies’ individual records were as follows:
Phoenix
Sedona
2018 Revenues
$
544,000
$
381,000
2018 Expenses
387,000
280,000
2018 Income from Sedona
63,350
Retained earnings 12/31/18
270,350
224,500
On its December 31, 2018, consolidated…
Allen Company acquired 100 percent of Bradford Company’s voting stock on January 1, 2014, by issuing 10,000 shares of its $10 par value common stock (having a fair value of $14 per share). As of that date, Bradford had stockholders’ equity totaling $105,000. Land shown on Bradford’s accounting records was undervalued by $10,000. Equipment (with a five-year remaining life) was undervalued by $5,000. A secret formula developed by Bradford was appraised at $20,000 with an estimated life of 20 years.
Following are the separate financial statements for the two companies for the year ending December 31, 2018. There were no intra-entity payables on that date. Credit balances are indicated by parentheses.
a. Explain how Allen derived the $66,000 balance in the Subsidiary Earnings account.
b. Prepare a worksheet to consolidate the financial information for these two companies
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
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
- ALPHA CORP. bought 40% of BETA INC.'s outstanding ordinary shares on January 2, 2015, for P4,000,000. The carrying amount of BETA’s net assets at the purchase date totaled P9,000,000. Fair values and carrying amounts were the same for all items except for plant and inventories, for which fair values exceeded their carrying amounts by P900,000 and P100,000, respectively. The plant has an 18-year life. All inventories were sold during 2015. During 2015, BETA reported profit of P1,200,000 and paid a P200,000 cash dividend. What amount should ALPHA report in its statement of comprehensive income from its investment in BETA for the year ended December 31, 2015?arrow_forwardOn January 2, 2013, Slurg Corporation paid $600,000 to acquire 60% interest in Padwaddy Inc. At that time, the book value of Padwaddy's stockholders' equity included $700,000 of common stock and $1,800,000 of retained earnings. All the excess purchase cost over the book value acquired was attributable to a patent with an estimated life of 10 years. Padwaddy paid $6,250 of dividends each quarter for the next two years, and reported net income of $180,000 for 2013 and $220,000 for 2014. Slurg recorded all activities related to their investment using the equity method. Required: Calculate Slurg's income from Padwaddy for 2013. Calculate Slurg's income from Padwaddy for 2014. Determine the balance of Slurg's Investment in Padwaddy account on December 31, 2014.arrow_forwardOn January 1, 2017, Stream Company acquired 30 percent of the outstanding voting shares of Q-Video, Inc., for $770,000. Q-Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of $1.9 million and $700,000, respectively. A customer list compiled by Q-Video had an appraised value of $300,000, although it was not recorded on its books. The expected remaining life of the customer list was five years with straight-line amortization deemed appropriate. Any remaining excess cost was not identifiable with any particular asset and thus was considered goodwill.Q-Video generated net income of $250,000 in 2017 and a net loss of $100,000 in 2018. In each of these two years, Q-Video declared and paid a cash dividend of $15,000 to its stockholders.During 2017, Q-Video sold inventory that had an original cost of $100,000 to Stream for $160,000. Of this balance, $80,000 was resold to outsiders during 2017, and the remainder was…arrow_forward
- On January 1, 2017, Stream Company acquired 30 percent of the outstanding voting shares of Q-Video, Inc., for $770,000. Q-Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of $1.9 million and $700,000, respectively. A customer list compiled by Q-Video had an appraised value of $300,000, although it was not recorded on its books. The expected remaining life of the customer list was five years with straight-line amortization deemed appropriate. Any remaining excess cost was not identifiable with any particular asset and thus was considered goodwill. Q-Video generated net income of $250,000 in 2017 and a net loss of $100,000 in 2018. In each of these two years, Q-Video declared and paid a cash dividend of $15,000 to its stockholders. During 2017, Q-Video sold inventory that had an original cost of $100,000 to Stream for $160,000. Of this balance, $80,000 was resold to outsiders during 2017, and the remainder…arrow_forwardAllen Company acquired 100 percent of Bradford Company's voting stock on January 1, 2017, by Issuing 10,000 shares of its $10 par value common stock (having a fair value of $17.50 per share). As of that date, Bradford had stockholders' equity totaling $112,150. Land shown on Bradford's accounting records was undervalued by $19.700. Equipment (with a five-year remaining life) was undervalued by $6,750. A secret formula developed by Bradford was appraised at $36,400 with an estimated life of 20 years. The following are the separate financial statements for the two companies for the year ending December 31, 2021. There were no Intra-entity payables on that date. Credit balances are indicated by parentheses. Allen Company Revenues $ (521,000) Bradford Company $ (303,750) 115,500 54,000 e Cost of goods sold Depreciation expense Subsidiary earnings 172,000 189,000 (131,080) (291,080) Net income $ $ (134,250) Retained earnings, 1/1/21 Net income (above) $ (762,000) (291,080) 175,500 $…arrow_forwardOn January 1, 2023, Stream Company acquired 25 percent of the outstanding voting shares of Q-Video, Incorporated, for $718,000. Q- Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of $1.8 million and $669,000, respectively. A customer list compiled by Q-Video had an appraised value of $234,000, although it was not recorded on its books. The expected remaining life of the customer list was five years with straight-line amortization deemed appropriate. Any remaining excess cost was not identifiable with any particular asset and thus was considered goodwill. Q-Video generated net Income of $222,000 in 2023 and a net loss of $147,000 in 2024. In each of these two years, Q-Video declared and paid a cash dividend of $16,000 to its stockholders. During 2023, Q-Video sold Inventory that had an original cost of $111,000 to Stream for $150,000. Of this balance, $75,000 was resold to outsiders during 2023, and the…arrow_forward
- On January 1, 2023, Stream Company acquired 20 percent of the outstanding voting shares of Q-Video, Incorporated, for $774,000. Q- Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of $2.2 million and $658,000, respectively. A customer list compiled by Q-Video had an appraised value of $360,000, although it was not recorded on its books. The expected remaining life of the customer list was five years with straight-line amortization deemed appropriate. Any remaining excess cost was not identifiable with any particular asset and thus was considered goodwill. Q-Video generated net income of $316,000 in 2023 and a net loss of $130,000 in 2024. In each of these two years, Q-Video declared and paid a cash dividend of $18,000 to its stockholders. During 2023, Q-Video sold inventory that had an original cost of $84,000 to Stream for $150,000. Of this balance, $75,000 was resold to outsiders during 2023, and the…arrow_forwardM On January 1, 2023, Stream Company acquired 21 percent of the outstanding voting shares of Q-Video, Incorporated, for $718,000. Q- Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of $2.6 million and $768,000, respectively. A customer list compiled by Q-Video had an appraised value of $312,000, although it was not recorded on its books. The expected remaining life of the customer list was six years with straight-line amortization deemed appropriate. Any remaining excess cost was not identifiable with any particular asset and thus was considered goodwill Q-Video generated net income of $284,000 in 2023 and a net loss of $108,000 in 2024 In each of these two years, Q-Video declared and paid a cash dividend of $10,000 to its stockholders During 2023, Q-Video sold inventory that had an original cost of $80,000 to Stream for $160,000. Of this balance, $77,000 was resold to outsiders during 2023, and the…arrow_forwardOn June 30, 2014, PC Company purchased all of the common stock of Silicon Company by issuing 100,000 shares of its $1 par value common stock, with a market value of $25/share. PC Company incurred $400,000 in registration and issuing costs, and $250,000 in consulting and legal fees, paid in cash. The book value of Silicon Company at the date of acquisition was $1,000,000, consisting of capital stock of $560,000, retained earnings of $280,000 (credit balance), treasury stock of $35,000, and accumulated other comprehensive income of $195,000 (credit balance). The carrying values of Silicon's reported assets and liabilities approximate fair value, but it has $700,000 in customer lists, not reported on its balance sheet. PC's journal entry to record this acquisition includes a credit to additional paid in capital? PC's journal entry to record this acquisition includes a debit to investment in Silicon? What is the Eliminating entry Eliminating entry a debit of goodwill are? What are the…arrow_forward
- On January 1, 2023, Stream Company acquired 30 percent of the outstanding voting shares of Q-Video, Incorporated, for $720,000. Q-Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of $1.8 million and $772,000, respectively. A customer list compiled by Q-Video had an appraised value of $298,000, although it was not recorded on its books. The expected remaining life of the customer list was twenty five years with straight-line amortization deemed appropriate. Any remaining excess cost was not identifiable with any particular asset and thus was considered goodwill. Q-Video generated net income of $370,000 in 2023 and a net loss of $116,000 in 2024. In each of these two years, Q-Video declared and paid a cash dividend of $18,000 to its stockholders. During 2023, Q-Video sold inventory that had an original cost of $100,040 to Stream for $164,000. Of this balance, $82,000 was resold to outsiders during 2023, and…arrow_forwardOn January 2, 2017, D Corporation purchased 80% of the outstanding shares of C Company for P4,750,000. At that date, C had P 4,000,000 of ordinary shares outstanding and retained earnings of P 1,600,000. C’s equipment with a remaining life of 5 years had a book value of P 2,250,000 and a fair value of P2,630,000. C’s remaining assets had book value equal to their fair values. All intangibles except goodwill are expected to have remaining lives of 8 years. The income and dividend figures for both D and C are as follows: Net income of D in 2017 is P 900,000;2018 is P 1,100,000. Net income of C in 2017 is P 340,000; 2018 is P 510,000. Dividends of D in 2017 is P 220,000; 2018 is P 390,000. Dividends of C in 2017 is P 70,000; 2018 is P130,000. D’s retained earnings balance at the date of acquisition was P 3,450,000.How much is the consolidated retained earnings attributable to controlling interest in 2018?Share of D Corporation in the adjusted and undistributed earnings of C Company…arrow_forwardOn January 1, 2017, Fisher Corporation purchased 40 percent (80,000 shares) of the common stock of Bowden, Inc., for $982,000 in cash and began to use the equity method for the investment. The price paid represented a $60,000 payment in excess of the book value of Fisher’s share of Bowden’s underlying net assets. Fisher was willing to make this extra payment because of a recently developed patent held by Bowden with a 15-year remaining life. All other assets were considered appropriately valued on Bowden’s books. Bowden declares and pays a $100,000 cash dividend to its stockholders each year on September 15. Bowden reported net income of $400,000 in 2017 and $380,000 in 2018. Each income figure was earned evenly throughout its respective years. On July 1, 2018, Fisher sold 10 percent (20,000 shares) of Bowden’s outstanding shares for $330,000 in cash. Although it sold this interest, Fisher maintained the ability to significantly influence Bowden’s decision-making process. Prepare the…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education