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Deck 2: Consolidated Statements: Date of Acquisition
ملء الشاشة (f)
سؤال
Paro Company purchased 80% of the voting common stock of Sabon Company for $900,000. There are no liabilities. The following book and fair values are available for Sabon: 
The machinery will appear on the consolidated balance sheet at ____.
A) $600,000
B) $540,000
C) $480,000
D) $300,000
The machinery will appear on the consolidated balance sheet at ____.A) $600,000
B) $540,000
C) $480,000
D) $300,000
سؤال
سؤال
When it purchased Sutton, Inc. on January 1, 20X1, Pavin Corporation issued 500,000 shares of its $5 par voting common stock. On that date the fair value of those shares totaled $4,200,000. Related to the acquisition, Pavin had payments to the attorneys and accountants of $200,000, and stock issuance fees of $100,000. Immediately prior to the purchase, the equity sections of the two firms appeared as follows: 
Immediately after the purchase, the consolidated balance sheet should report paid-in capital in excess of par of
A) $8,900,000
B) $9,100,000
C) $9,200,000
D) $9,300,000
Immediately after the purchase, the consolidated balance sheet should report paid-in capital in excess of par ofA) $8,900,000
B) $9,100,000
C) $9,200,000
D) $9,300,000
سؤال
سؤال
Scenario 2-1
Pinehollow acquired all of the outstanding stock of Stonebriar by issuing 100,000 shares of its $1 par value stock. The shares have a fair value of $15 per share. Pinehollow also paid $25,000 in direct acquisition costs. Prior to the transaction, the companies have the following balance sheets:
The fair values of Stonebriar's inventory and plant, property and equipment are $700,000 and $1,000,000, respectively.
Refer to Scenario 2-1. The journal entry to record the purchase of Stonebriar would include a
A) credit to common stock for $1,500,000.
B) credit to additional paid-in capital for $1,100,000.
C) debit to investment for $1,500,000.
D) debit to investment for $1,525,000.
Pinehollow acquired all of the outstanding stock of Stonebriar by issuing 100,000 shares of its $1 par value stock. The shares have a fair value of $15 per share. Pinehollow also paid $25,000 in direct acquisition costs. Prior to the transaction, the companies have the following balance sheets:
The fair values of Stonebriar's inventory and plant, property and equipment are $700,000 and $1,000,000, respectively.Refer to Scenario 2-1. The journal entry to record the purchase of Stonebriar would include a
A) credit to common stock for $1,500,000.
B) credit to additional paid-in capital for $1,100,000.
C) debit to investment for $1,500,000.
D) debit to investment for $1,525,000.
سؤال
سؤال
Scenario 2-1
Pinehollow acquired all of the outstanding stock of Stonebriar by issuing 100,000 shares of its $1 par value stock. The shares have a fair value of $15 per share. Pinehollow also paid $25,000 in direct acquisition costs. Prior to the transaction, the companies have the following balance sheets:
The fair values of Stonebriar's inventory and plant, property and equipment are $700,000 and $1,000,000, respectively.
Refer to Scenario 2-1. Goodwill associated with the purchase of Stonebriar is ____.
A) $100,000
B) $125,000
C) $300,000
D) $325,000
Pinehollow acquired all of the outstanding stock of Stonebriar by issuing 100,000 shares of its $1 par value stock. The shares have a fair value of $15 per share. Pinehollow also paid $25,000 in direct acquisition costs. Prior to the transaction, the companies have the following balance sheets:
The fair values of Stonebriar's inventory and plant, property and equipment are $700,000 and $1,000,000, respectively.Refer to Scenario 2-1. Goodwill associated with the purchase of Stonebriar is ____.
A) $100,000
B) $125,000
C) $300,000
D) $325,000
سؤال
Parr Company purchased 100% of the voting common stock of Super Company for $2,000,000. There are no liabilities. The following book and fair values are available: 
The machinery will appear on the consolidated balance sheet at ____.
A) $560,000
B) $860,000
C) $600,000
D) $900,000
The machinery will appear on the consolidated balance sheet at ____.A) $560,000
B) $860,000
C) $600,000
D) $900,000
سؤال
سؤال
Pagach Company purchased 100% of the voting common stock of Rage Company for $1,800,000. The following book and fair values are available: 
The bonds payable will appear on the consolidated balance sheet
A) at $300,000 (with no premium or discount shown).
B) at $300,000 less a discount of $50,000.
C) at $0; assets are recorded net of liabilities.
D) at an amount less than $250,000 since it is a bargain purchase.
The bonds payable will appear on the consolidated balance sheetA) at $300,000 (with no premium or discount shown).
B) at $300,000 less a discount of $50,000.
C) at $0; assets are recorded net of liabilities.
D) at an amount less than $250,000 since it is a bargain purchase.
سؤال
سؤال
سؤال
سؤال
سؤال
Supernova Company had the following summarized balance sheet on December 31, 20X1:
The fair value of the inventory and property and plant is $600,000 and $850,000, respectively.
Assume that Redstar Corporation exchanges 75,000 of its $3 par value shares of common stock, when the fair price is $20/share, for 100% of the common stock of Supernova Company. Redstar incurred acquisition costs of $5,000 and stock issuance costs of $5,000.
Required:
a.
What journal entry will Redstar Corporation record for the investment in Supernova?
b.
Prepare a supporting value analysis and determination and distribution of excess schedule
c.
Prepare Redstar's elimination and adjustment entry for the acquisition of Supernova.
The fair value of the inventory and property and plant is $600,000 and $850,000, respectively.Assume that Redstar Corporation exchanges 75,000 of its $3 par value shares of common stock, when the fair price is $20/share, for 100% of the common stock of Supernova Company. Redstar incurred acquisition costs of $5,000 and stock issuance costs of $5,000.
Required:
a.
What journal entry will Redstar Corporation record for the investment in Supernova?
b.
Prepare a supporting value analysis and determination and distribution of excess schedule
c.
Prepare Redstar's elimination and adjustment entry for the acquisition of Supernova.
سؤال
سؤال
سؤال
Assuming Investor owns 70% of Investee. What is the amount that will be recorded as Net Income for the Controlling Interest?A) $164,000
B) $171,000
C) $178,000
D) $180,000
سؤال
سؤال
سؤال
On January 1, 20X1, Parent Company purchased 100% of the common stock of Subsidiary Company for $280,000. On this date, Subsidiary had total owners' equity of $240,000.
On January 1, 20X1, the excess of cost over book value is due to a $15,000 undervaluation of inventory, to a $5,000 overvaluation of Bonds Payable, and to an undervaluation of land, building and equipment. The fair value of land is $50,000. The fair value of building and equipment is $200,000. The book value of the land is $30,000. The book value of the building and equipment is $180,000.
Required:
a.
Using the information above and on the separate worksheet, complete a value analysis schedule
b.
Complete schedule for determination and distribution of the excess of cost over book value.
c.
Complete the Figure 2-5 worksheet for a consolidated balance sheet as of January 1, 20X1.
On January 1, 20X1, the excess of cost over book value is due to a $15,000 undervaluation of inventory, to a $5,000 overvaluation of Bonds Payable, and to an undervaluation of land, building and equipment. The fair value of land is $50,000. The fair value of building and equipment is $200,000. The book value of the land is $30,000. The book value of the building and equipment is $180,000.
Required:
a.
Using the information above and on the separate worksheet, complete a value analysis schedule
b.
Complete schedule for determination and distribution of the excess of cost over book value.
c.
Complete the Figure 2-5 worksheet for a consolidated balance sheet as of January 1, 20X1.
سؤال
سؤال
سؤال
سؤال
سؤال
Fortuna Company issued 70,000 shares of $1 par stock, with a fair value of $20 per share, for 80% of the outstanding shares of Acappella Company. The firms had the following separate balance sheets prior to the acquisition:
Book values equal fair values for the assets and liabilities of Acappella Company, except for the property, plant, and equipment, which has a fair value of $1,600,000.
Required:
a.
Prepare a value analysis schedule
b.
Prepare a determination and distribution of excess schedule.
c.
Provide all eliminations on the partial balance sheet worksheet provided in Figure 2-8 and complete the noncontrolling interest column.
Book values equal fair values for the assets and liabilities of Acappella Company, except for the property, plant, and equipment, which has a fair value of $1,600,000.Required:
a.
Prepare a value analysis schedule
b.
Prepare a determination and distribution of excess schedule.
c.
Provide all eliminations on the partial balance sheet worksheet provided in Figure 2-8 and complete the noncontrolling interest column.
سؤال
On December 31, 20X1, Priority Company purchased 80% of the common stock of Subsidiary Company for $1,550,000. On this date, Subsidiary had total owners' equity of $650,000 (common stock $100,000; other paid-in capital, $200,000; and retained earnings, $350,000). Any excess of cost over book value is due to the under or overvaluation of certain assets and liabilities. Assets and liabilities with differences in book and fair values are provided in the following table:
Remaining excess, if any, is due to goodwill.
Required:
a.
Using the information above and on the separate worksheet, prepare a schedule to determine and distribute the excess of cost over book value.
b.
Complete the Figure 2-1 worksheet for a consolidated balance sheet as of December 31, 20X1.
Remaining excess, if any, is due to goodwill.Required:
a.
Using the information above and on the separate worksheet, prepare a schedule to determine and distribute the excess of cost over book value.
b.
Complete the Figure 2-1 worksheet for a consolidated balance sheet as of December 31, 20X1.
سؤال
Supernova Company had the following summarized balance sheet on December 31, 20X1:
The fair value of the inventory and property and plant is $600,000 and $850,000, respectively.
Required:
a.
Assume that Redstar Corporation purchases 100% of the common stock of Supernova Company for $1,800,000. What value will be assigned to the following accounts of the Supernova Company when preparing a consolidated balance sheet on December 31, 20X1?
(1)
Inventory
_________
(2)
Property and plant
_________
(3)
Goodwill
_________
(4)
Noncontrolling interest
_________
b.
Prepare a valuation schedule
c.
Prepare a supporting determination and distribution of excess schedule.
The fair value of the inventory and property and plant is $600,000 and $850,000, respectively.Required:
a.
Assume that Redstar Corporation purchases 100% of the common stock of Supernova Company for $1,800,000. What value will be assigned to the following accounts of the Supernova Company when preparing a consolidated balance sheet on December 31, 20X1?
(1)
Inventory
_________
(2)
Property and plant
_________
(3)
Goodwill
_________
(4)
Noncontrolling interest
_________
b.
Prepare a valuation schedule
c.
Prepare a supporting determination and distribution of excess schedule.
سؤال
Answer the following based upon the above financial statements: a.
How much did Pepper Co. pay to acquire Salt Inc.?
b.
What was the fair value of Salt's Inventory at the time of acquisition?
c.
Was the book value of Salt's Building and Equipment overvalued or undervalued relative to the Building and Equipment's fair value at the time of acquisition?
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ملء الشاشة (f)
Deck 2: Consolidated Statements: Date of Acquisition
1
Paro Company purchased 80% of the voting common stock of Sabon Company for $900,000. There are no liabilities. The following book and fair values are available for Sabon: The machinery will appear on the consolidated balance sheet at ____.
A) $600,000
B) $540,000
C) $480,000
D) $300,000
The machinery will appear on the consolidated balance sheet at ____.A) $600,000
B) $540,000
C) $480,000
D) $300,000
A
2
A subsidiary was acquired for cash in a business combination on December 31, 20X1. The purchase price exceeded the fair value of identifiable net assets. The acquired company owned equipment with a fair value in excess of the book value as of the date of the combination. A consolidated balance sheet prepared on December 31, 20X1, would
A) report the excess of the fair value over the book value of the equipment as part of goodwill.
B) report the excess of the fair value over the book value of the equipment as part of the plant and equipment account.
C) reduce retained earnings for the excess of the fair value of the equipment over its book value.
D) make no adjustment for the excess of the fair value of the equipment over book value. Instead, it is an adjustment to expense over the life of the equipment.
A) report the excess of the fair value over the book value of the equipment as part of goodwill.
B) report the excess of the fair value over the book value of the equipment as part of the plant and equipment account.
C) reduce retained earnings for the excess of the fair value of the equipment over its book value.
D) make no adjustment for the excess of the fair value of the equipment over book value. Instead, it is an adjustment to expense over the life of the equipment.
B
3
When it purchased Sutton, Inc. on January 1, 20X1, Pavin Corporation issued 500,000 shares of its $5 par voting common stock. On that date the fair value of those shares totaled $4,200,000. Related to the acquisition, Pavin had payments to the attorneys and accountants of $200,000, and stock issuance fees of $100,000. Immediately prior to the purchase, the equity sections of the two firms appeared as follows: Immediately after the purchase, the consolidated balance sheet should report paid-in capital in excess of par of
A) $8,900,000
B) $9,100,000
C) $9,200,000
D) $9,300,000
Immediately after the purchase, the consolidated balance sheet should report paid-in capital in excess of par ofA) $8,900,000
B) $9,100,000
C) $9,200,000
D) $9,300,000
C
4
The goal of the consolidation process is for:
A) asset acquisitions and 100% stock acquisitions to result in the same balance sheet.
B) goodwill to appear on the balance sheet of the consolidated entity.
C) the assets of the noncontrolling interest to be predominately displayed on the balance sheet.
D) the investment in the subsidiary to be properly valued on the consolidated balance sheet.
A) asset acquisitions and 100% stock acquisitions to result in the same balance sheet.
B) goodwill to appear on the balance sheet of the consolidated entity.
C) the assets of the noncontrolling interest to be predominately displayed on the balance sheet.
D) the investment in the subsidiary to be properly valued on the consolidated balance sheet.
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5
Scenario 2-1
Pinehollow acquired all of the outstanding stock of Stonebriar by issuing 100,000 shares of its $1 par value stock. The shares have a fair value of $15 per share. Pinehollow also paid $25,000 in direct acquisition costs. Prior to the transaction, the companies have the following balance sheets:
The fair values of Stonebriar's inventory and plant, property and equipment are $700,000 and $1,000,000, respectively.
Refer to Scenario 2-1. The journal entry to record the purchase of Stonebriar would include a
A) credit to common stock for $1,500,000.
B) credit to additional paid-in capital for $1,100,000.
C) debit to investment for $1,500,000.
D) debit to investment for $1,525,000.
Pinehollow acquired all of the outstanding stock of Stonebriar by issuing 100,000 shares of its $1 par value stock. The shares have a fair value of $15 per share. Pinehollow also paid $25,000 in direct acquisition costs. Prior to the transaction, the companies have the following balance sheets:
The fair values of Stonebriar's inventory and plant, property and equipment are $700,000 and $1,000,000, respectively.Refer to Scenario 2-1. The journal entry to record the purchase of Stonebriar would include a
A) credit to common stock for $1,500,000.
B) credit to additional paid-in capital for $1,100,000.
C) debit to investment for $1,500,000.
D) debit to investment for $1,525,000.
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6
Which of the following costs of a business combination can be included in the value charged to paid-in-capital in excess of par?
A) direct and indirect acquisition costs
B) direct acquisition costs
C) direct acquisition costs and stock issue costs if stock is issued as consideration
D) stock issue costs if stock is issued as consideration
A) direct and indirect acquisition costs
B) direct acquisition costs
C) direct acquisition costs and stock issue costs if stock is issued as consideration
D) stock issue costs if stock is issued as consideration
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7
Scenario 2-1
Pinehollow acquired all of the outstanding stock of Stonebriar by issuing 100,000 shares of its $1 par value stock. The shares have a fair value of $15 per share. Pinehollow also paid $25,000 in direct acquisition costs. Prior to the transaction, the companies have the following balance sheets:
The fair values of Stonebriar's inventory and plant, property and equipment are $700,000 and $1,000,000, respectively.
Refer to Scenario 2-1. Goodwill associated with the purchase of Stonebriar is ____.
A) $100,000
B) $125,000
C) $300,000
D) $325,000
Pinehollow acquired all of the outstanding stock of Stonebriar by issuing 100,000 shares of its $1 par value stock. The shares have a fair value of $15 per share. Pinehollow also paid $25,000 in direct acquisition costs. Prior to the transaction, the companies have the following balance sheets:
The fair values of Stonebriar's inventory and plant, property and equipment are $700,000 and $1,000,000, respectively.Refer to Scenario 2-1. Goodwill associated with the purchase of Stonebriar is ____.
A) $100,000
B) $125,000
C) $300,000
D) $325,000
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8
Parr Company purchased 100% of the voting common stock of Super Company for $2,000,000. There are no liabilities. The following book and fair values are available: The machinery will appear on the consolidated balance sheet at ____.
A) $560,000
B) $860,000
C) $600,000
D) $900,000
The machinery will appear on the consolidated balance sheet at ____.A) $560,000
B) $860,000
C) $600,000
D) $900,000
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9
On June 30, 20X1, Naeder Corporation purchased for cash at $10 per share all 100,000 shares of the outstanding common stock of the Tedd Company. The total fair value of all identifiable net assets of Tedd was $1,400,000. The only noncurrent asset is property with a fair value of $350,000. The consolidated balance sheet of Naeder and its wholly owned subsidiary on June 30, 20X1, should report
A) a retained earnings balance that is inclusive of a gain of $400,000.
B) goodwill of $400,000.
C) a retained earnings balance that is inclusive of a gain of $350,000.
D) a gain of $400,000
A) a retained earnings balance that is inclusive of a gain of $400,000.
B) goodwill of $400,000.
C) a retained earnings balance that is inclusive of a gain of $350,000.
D) a gain of $400,000
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10
Pagach Company purchased 100% of the voting common stock of Rage Company for $1,800,000. The following book and fair values are available: The bonds payable will appear on the consolidated balance sheet
A) at $300,000 (with no premium or discount shown).
B) at $300,000 less a discount of $50,000.
C) at $0; assets are recorded net of liabilities.
D) at an amount less than $250,000 since it is a bargain purchase.
The bonds payable will appear on the consolidated balance sheetA) at $300,000 (with no premium or discount shown).
B) at $300,000 less a discount of $50,000.
C) at $0; assets are recorded net of liabilities.
D) at an amount less than $250,000 since it is a bargain purchase.
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11
The investment in a subsidiary should be recorded on the parent's books at the
A) underlying book value of the subsidiary's net assets.
B) fair value of the subsidiary's net identifiable assets.
C) fair value of the consideration given.
D) fair value of the consideration given plus an estimated value for goodwill.
A) underlying book value of the subsidiary's net assets.
B) fair value of the subsidiary's net identifiable assets.
C) fair value of the consideration given.
D) fair value of the consideration given plus an estimated value for goodwill.
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12
The SEC requires the use of push-down accounting in some specific situations. Push-down accounting results in:
A) goodwill be recorded in the parent company separate accounts.
B) eliminating subsidiary retained earnings and paid-in capital in excess of par.
C) reflecting fair values on the subsidiary's separate accounts.
D) changing the consolidation worksheet procedure because no adjustment is necessary to eliminate the investment in subsidiary account.
A) goodwill be recorded in the parent company separate accounts.
B) eliminating subsidiary retained earnings and paid-in capital in excess of par.
C) reflecting fair values on the subsidiary's separate accounts.
D) changing the consolidation worksheet procedure because no adjustment is necessary to eliminate the investment in subsidiary account.
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13
The SEC and FASB has recommended that a parent corporation should consolidate the financial statements of the subsidiary into its financial statements when it exercises control over the subsidiary, even without majority ownership. In which of the following situations would control NOT be evident?
A) Access to subsidiary assets is available to all shareholders.
B) Dividend policy is set by the parent.
C) The subsidiary does not determine compensation for its main employees.
D) Substantially all cash flows of the subsidiary flow to the controlling shareholders.
A) Access to subsidiary assets is available to all shareholders.
B) Dividend policy is set by the parent.
C) The subsidiary does not determine compensation for its main employees.
D) Substantially all cash flows of the subsidiary flow to the controlling shareholders.
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14
In an 80% purchase accounted for as a tax-free exchange, the excess of cost over book value is $200,000. The equipment's book value for tax purposes is $100,000 and its fair value is $150,000. All other identifiable assets and liabilities have fair values equal to their book values. The tax rate is 30%. What is the total deferred tax liability that should be recognized on the consolidated balance sheet on the date of purchase?
A) $12,000
B) $60,000
C) $72,857
D) $85,714
A) $12,000
B) $60,000
C) $72,857
D) $85,714
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15
Supernova Company had the following summarized balance sheet on December 31, 20X1:
The fair value of the inventory and property and plant is $600,000 and $850,000, respectively.
Assume that Redstar Corporation exchanges 75,000 of its $3 par value shares of common stock, when the fair price is $20/share, for 100% of the common stock of Supernova Company. Redstar incurred acquisition costs of $5,000 and stock issuance costs of $5,000.
Required:
a.
What journal entry will Redstar Corporation record for the investment in Supernova?
b.
Prepare a supporting value analysis and determination and distribution of excess schedule
c.
Prepare Redstar's elimination and adjustment entry for the acquisition of Supernova.
The fair value of the inventory and property and plant is $600,000 and $850,000, respectively.Assume that Redstar Corporation exchanges 75,000 of its $3 par value shares of common stock, when the fair price is $20/share, for 100% of the common stock of Supernova Company. Redstar incurred acquisition costs of $5,000 and stock issuance costs of $5,000.
Required:
a.
What journal entry will Redstar Corporation record for the investment in Supernova?
b.
Prepare a supporting value analysis and determination and distribution of excess schedule
c.
Prepare Redstar's elimination and adjustment entry for the acquisition of Supernova.
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16
Consolidated financial statements are designed to provide:
A) informative information to all shareholders.
B) the results of operations, cash flow, and the balance sheet in an understandable and informative manner for creditors.
C) the results of operations, cash flow, and the balance sheet as if the parent and subsidiary were a single entity.
D) subsidiary information for the subsidiary shareholders.
A) informative information to all shareholders.
B) the results of operations, cash flow, and the balance sheet in an understandable and informative manner for creditors.
C) the results of operations, cash flow, and the balance sheet as if the parent and subsidiary were a single entity.
D) subsidiary information for the subsidiary shareholders.
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17
Consolidated financial statements are appropriate even without a majority ownership if which of the following exists:
A) the subsidiary has the right to appoint members of the parent company's board of directors.
B) the parent company has the right to appoint a majority of the members of the subsidiary's board of directors through a large minority voting interest.
C) the subsidiary owns a large minority voting interest in the parent company.
D) the parent company has an ability to assume the role of general partner in a limited partnership with the approval of the subsidiary's board of directors.
A) the subsidiary has the right to appoint members of the parent company's board of directors.
B) the parent company has the right to appoint a majority of the members of the subsidiary's board of directors through a large minority voting interest.
C) the subsidiary owns a large minority voting interest in the parent company.
D) the parent company has an ability to assume the role of general partner in a limited partnership with the approval of the subsidiary's board of directors.
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18
Assuming Investor owns 70% of Investee. What is the amount that will be recorded as Net Income for the Controlling Interest?A) $164,000
B) $171,000
C) $178,000
D) $180,000
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19
When a company purchases another company that has existing goodwill and the transaction is accounted for as a stock acquisition, the goodwill should be treated in the following manner.
A) Goodwill on the books of an acquired company should be disregarded.
B) Goodwill is recorded prior to recording fixed assets.
C) Goodwill is not recorded until all assets are stated at full fair value.
D) Goodwill is treated consistent with other tangible assets.
A) Goodwill on the books of an acquired company should be disregarded.
B) Goodwill is recorded prior to recording fixed assets.
C) Goodwill is not recorded until all assets are stated at full fair value.
D) Goodwill is treated consistent with other tangible assets.
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20
Judd Company issued nonvoting preferred stock with a fair value of $1,500,000 in exchange for all the outstanding common stock of the Bath Corporation. On the date of the exchange, Bath had tangible net assets with a book value of $900,000 and a fair value of $1,400,000. In addition, Judd issued preferred stock valued at $100,000 to an individual as a finder's fee for arranging the transaction. As a result of these transactions, Judd should report an increase in net assets of ____.
A) $900,000
B) $1,400,000
C) $1,500,000
D) $1,600,000
A) $900,000
B) $1,400,000
C) $1,500,000
D) $1,600,000
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21
On January 1, 20X1, Parent Company purchased 100% of the common stock of Subsidiary Company for $280,000. On this date, Subsidiary had total owners' equity of $240,000.
On January 1, 20X1, the excess of cost over book value is due to a $15,000 undervaluation of inventory, to a $5,000 overvaluation of Bonds Payable, and to an undervaluation of land, building and equipment. The fair value of land is $50,000. The fair value of building and equipment is $200,000. The book value of the land is $30,000. The book value of the building and equipment is $180,000.
Required:
a.
Using the information above and on the separate worksheet, complete a value analysis schedule
b.
Complete schedule for determination and distribution of the excess of cost over book value.
c.
Complete the Figure 2-5 worksheet for a consolidated balance sheet as of January 1, 20X1.
On January 1, 20X1, the excess of cost over book value is due to a $15,000 undervaluation of inventory, to a $5,000 overvaluation of Bonds Payable, and to an undervaluation of land, building and equipment. The fair value of land is $50,000. The fair value of building and equipment is $200,000. The book value of the land is $30,000. The book value of the building and equipment is $180,000.
Required:
a.
Using the information above and on the separate worksheet, complete a value analysis schedule
b.
Complete schedule for determination and distribution of the excess of cost over book value.
c.
Complete the Figure 2-5 worksheet for a consolidated balance sheet as of January 1, 20X1.
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22
A parent company purchases an 80% interest in a subsidiary at a price high enough to revalue all assets and allow for goodwill on the interest purchased. If "push down accounting" were used in conjunction with the "economic entity concept," what unique procedures would be used?
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23
On December 31, 20X1, Parent Company purchased 80% of the common stock of Subsidiary Company for $280,000. On this date, Subsidiary had total owners' equity of $250,000 (common stock $20,000; other paid-in capital, $80,000; and retained earnings, $150,000). Any excess of cost over book value is due to the under or overvaluation of certain assets and liabilities. Inventory is undervalued $5,000. Land is undervalued $20,000. Buildings and equipment have a fair value which exceeds book value by $30,000. Bonds payable are overvalued $5,000. The remaining excess, if any, is due to goodwill.
Required:
a.
Prepare a value analysis schedule for this business combination.
b.
Prepare the determination and distribution schedule for this business combination
c.
Prepare the necessary elimination entries in general journal form.
Required:
a.
Prepare a value analysis schedule for this business combination.
b.
Prepare the determination and distribution schedule for this business combination
c.
Prepare the necessary elimination entries in general journal form.
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24
Discuss the conditions under which the FASB would assume a presumption of control. Additionally, under what circumstances might the FASB require consolidation even though the parent does not control the subsidiary?
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25
On January 1, 20X1, Parent Company purchased 90% of the common stock of Subsidiary Company for $252,000. On this date, Subsidiary had total owners' equity of $240,000 consisting of $50,000 in common stock, $70,000 additional paid-in capital, and $120,000 in retained earnings.
On January 1, 20X1, the excess of cost over book value is due to a $15,000 undervaluation of inventory, to a $5,000 overvaluation of Bonds Payable, and to an undervaluation of land, building and equipment. The fair value of land is $50,000. The fair value of building and equipment is $200,000. The book value of the land is $30,000. The book value of the building and equipment is $180,000.
Required:
a.
Complete the valuation analysis schedule for this combination.
b.
Complete the determination and distribution schedule for this combination.
c.
Prepare, in general journal form, the elimination entries required to prepare a consolidated balance sheet for Parent and Subsidiary on January 1, 20X1.
On January 1, 20X1, the excess of cost over book value is due to a $15,000 undervaluation of inventory, to a $5,000 overvaluation of Bonds Payable, and to an undervaluation of land, building and equipment. The fair value of land is $50,000. The fair value of building and equipment is $200,000. The book value of the land is $30,000. The book value of the building and equipment is $180,000.
Required:
a.
Complete the valuation analysis schedule for this combination.
b.
Complete the determination and distribution schedule for this combination.
c.
Prepare, in general journal form, the elimination entries required to prepare a consolidated balance sheet for Parent and Subsidiary on January 1, 20X1.
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26
Fortuna Company issued 70,000 shares of $1 par stock, with a fair value of $20 per share, for 80% of the outstanding shares of Acappella Company. The firms had the following separate balance sheets prior to the acquisition:
Book values equal fair values for the assets and liabilities of Acappella Company, except for the property, plant, and equipment, which has a fair value of $1,600,000.
Required:
a.
Prepare a value analysis schedule
b.
Prepare a determination and distribution of excess schedule.
c.
Provide all eliminations on the partial balance sheet worksheet provided in Figure 2-8 and complete the noncontrolling interest column.
Book values equal fair values for the assets and liabilities of Acappella Company, except for the property, plant, and equipment, which has a fair value of $1,600,000.Required:
a.
Prepare a value analysis schedule
b.
Prepare a determination and distribution of excess schedule.
c.
Provide all eliminations on the partial balance sheet worksheet provided in Figure 2-8 and complete the noncontrolling interest column.
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27
On December 31, 20X1, Priority Company purchased 80% of the common stock of Subsidiary Company for $1,550,000. On this date, Subsidiary had total owners' equity of $650,000 (common stock $100,000; other paid-in capital, $200,000; and retained earnings, $350,000). Any excess of cost over book value is due to the under or overvaluation of certain assets and liabilities. Assets and liabilities with differences in book and fair values are provided in the following table:
Remaining excess, if any, is due to goodwill.
Required:
a.
Using the information above and on the separate worksheet, prepare a schedule to determine and distribute the excess of cost over book value.
b.
Complete the Figure 2-1 worksheet for a consolidated balance sheet as of December 31, 20X1.
Remaining excess, if any, is due to goodwill.Required:
a.
Using the information above and on the separate worksheet, prepare a schedule to determine and distribute the excess of cost over book value.
b.
Complete the Figure 2-1 worksheet for a consolidated balance sheet as of December 31, 20X1.
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28
Supernova Company had the following summarized balance sheet on December 31, 20X1:
The fair value of the inventory and property and plant is $600,000 and $850,000, respectively.
Required:
a.
Assume that Redstar Corporation purchases 100% of the common stock of Supernova Company for $1,800,000. What value will be assigned to the following accounts of the Supernova Company when preparing a consolidated balance sheet on December 31, 20X1?
(1)
Inventory
_________
(2)
Property and plant
_________
(3)
Goodwill
_________
(4)
Noncontrolling interest
_________
b.
Prepare a valuation schedule
c.
Prepare a supporting determination and distribution of excess schedule.
The fair value of the inventory and property and plant is $600,000 and $850,000, respectively.Required:
a.
Assume that Redstar Corporation purchases 100% of the common stock of Supernova Company for $1,800,000. What value will be assigned to the following accounts of the Supernova Company when preparing a consolidated balance sheet on December 31, 20X1?
(1)
Inventory
_________
(2)
Property and plant
_________
(3)
Goodwill
_________
(4)
Noncontrolling interest
_________
b.
Prepare a valuation schedule
c.
Prepare a supporting determination and distribution of excess schedule.
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29
Answer the following based upon the above financial statements: a.
How much did Pepper Co. pay to acquire Salt Inc.?
b.
What was the fair value of Salt's Inventory at the time of acquisition?
c.
Was the book value of Salt's Building and Equipment overvalued or undervalued relative to the Building and Equipment's fair value at the time of acquisition?
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