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
Question
Chapter 1, Problem 1.3E
To determine
Introduction: Acquisition is a corporate term used to represent purchase of another company and gaining the ownership of the company.
To provide: Assets versus stock acquisition
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash on January 1, 2015. The remaining 40 percent of the Sea-Breeze shares traded near a total value of $276,000 both before and after the acquisition date. On January 1, 2015, Sea-Breeze had the following assets and liabilities:The companies’ financial statements for the year ending December 31, 2018, follow:Answer the following questions:a. How can the accountant determine that the parent has applied the initial value method?b. What is the annual excess amortization initially recognized in connection with this acquisition?c. If the parent had applied the equity method, what investment income would the parent have recorded in 2018?d. What amount should the parent report as retained earnings in its January 1, 2018, consolidated balance sheet?e. What is consolidated net income for 2018 and what amounts are attributable to the controlling and noncontrolling interests?f. Within consolidated statements at January 1,…
On 1 July 2019, Brad Ltd acquired all of the assets and liabilities
of Pitt Ltd. In exchange for these assets and liabilities, Brad Ltd
issued 100 000 shares that at date of issue had a fair value of
$5.20 per share. Costs of issuing these shares amounted to $1000.
Legal costs associated with the acquisition of Pitt Ltd amounted
to $1200.
The asset and liabilities of Pitt Ltd at 1 July 2019 were as follows:
Carrying amount
Fair value
Assets
$ 2000
10000
64 000
320 000
$ 2000
10000
Cash
Accounts receivable
68 000
232 000
Inventories
Equipment
Accumulated depreciation – equipment
(96 000)
240 000
Patents
280 000
Liabilities
(16 000)
(64 000)
Accounts payable
(16000)
(64 000)
Debentures
Required
(a) Prepare the acquisition analysis at 1 July 2019 for the
acquisition of Pitt Ltd by Brad Ltd.
Asap
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...
Knowledge Booster
Similar questions
- Born Company acquires an 80% interest in Roland Company for $660,000 cash on January 1, 2017. The NCI has a fair value of $165,000. Any excess of cost over book value is attributed to goodwill. To help pay for the acquisition, Born Company issues 5,000 shares of its common stock with a fair value of $70 per share. Roland’s balance sheet on the date of the purchase is as follows: Assets Liabilities and Equity Cash . . . . . . . . . . . . . . . . . . . . $ 20,000 Inventory . . . . . . . . . . . . . . . . 140,000 Property, plant, andequipment (net). . . . . . . . . . 550,000 Total assets . . . . . . . . . . . . . $710,000 Current liabilities . . . . . . . $110,000 Bonds payable . . . . . . . . . 100,000 Common stock ($10 par) . . 200,000 Retained earnings . . . . .. . . 300,000 Total liabilities and equity $710,000 Controlling share of net income for 2017 is $150,000, net of the noncontrolling interest of $10,000. Born declares and pays dividends of $10,000, and Roland…arrow_forwardOn 1 July 2019, Brad Ltd acquired all assets and liabilities of Pitt Ltd. In exchange for these assets and liabilities, Brad Ltd issued 100,000 shares that at date of issue had a fair value of $5.20 per share. Costs of issuing these shares amounted to $1,000. Legal cost associated with the acquisition of Pitt Ltd amounted to $1,200.The assets and liabilities of Pitt Ltd at 1 July 2019 were as follows:Carrying Amount ($) Fair Value ($)AssetsCash 2,000 2,000Accounts receivable 10,000 10,000Inventory 64,000 68,000Equipment 320,000 232,000Accumulated depn - Equipment (96,000) -Patents 280,000 280,000LiabilitiesAccounts payable (16,000) (16,000)Debentures (64,000) (64,000)Required:a) Prepare the acquisition analysis at 1 July 2019 for the acquisition of Pitt Ltd by Brad Ltd.b) Prepare the journal entries in the records of Brad Ltd at 1 July 2019.arrow_forwardOn 1/1/2020, ABC Corporation balance sheet included the following accounts: Patents $100,000, Bonds Payable $40,000, Common Stock $10,000, Retained Earnings $50,000. Book values of assets and liabilities were equal to their fair values. XYZ Corporation acquired 100% of the common stock of ABC Corporation on 1/1/2020 for $120,000 Cash. Which of the following entries was prepared to record the acquisition on XYZ's books? Patents? [Debit or credit by what amount] Bonds Payable? [Debit or credit by what amount] Cash? [Debit or credit by what amount] Investment in Subsidiary? [Debit or credit by what amount] Goodwill? [Debit or credit by what amount] Gain on Acquisition of Business? [Debit or credit by what amount]arrow_forward
- McCoy has the following account balances as of December 31, 2020 before an acquisition transaction takes place. Inventory $125,000 Land 450,000 Buildings (net) 575,000 Common stock ($10 par) 600,000 Additional paid-in capital 300,000 Retained earnings 250,000 The fair value of McCoy’s Land and Buildings are $650,000 and $600,000, respectively. On December 31, 2020, Ferguson Company issues 30,000 shares of its $10 par value ($30 fair value) common stock in exchange for all of the shares of McCoy’s common stock. Ferguson paid $12,000 for costs to issue the new shares of stock. Before the acquisition, Ferguson has $800,000 in its common stock account and $350,000 in its additional paid-in capital account. What will the consolidated common stock account be as a result of this acquisition?arrow_forwardOn August 27, 2015, Celgene Corporation acquired all of the outstanding stock of Receptos, Inc., in exchange for $7.6 billion in cash. Referring to Celgene’s 2015 financial statements and its July 14, 2015, press release announcing the acquisition, answer the following questions regarding the Receptos acquisition.1. Why did Celgene acquire Receptos?2. What accounting method was used, and for what amount, to record the acquisition?3. What amount did Celgene include in pre-combination service compensation in the total consideration transferred? What support is provided for this treatment in the Accounting Standards Codification (see ASC 805-30-30, paragraphs 9-13)?4. What allocations did Celgene make to the assets acquired and liabilities assumed in the acquisition? Provide a calculation showing how Celgene determined the amount allocated to goodwill.5. Describe the nature of the in-process research and development product rights acquired by Celgene in its acquisition of Receptos.6. How…arrow_forwardOn 1/1/2020, ABC Corporation balance sheet included the following accounts: Patents $100,000, Bonds Payable $40,000. Common Stock $10,000, Retained Earnings $50,000. Book values of assets and liabilities were equal to their fair values. XYZ Corporation acquired 100% of the common stock of ABC Corporation on 1/1/2020 for $120.000 Cash. Which of the following entries was prepared to record the acquisition on XYZ's books? Patents Bonds Payable Cash Investment in Subsidiary Goodwill Gain on Acquisition of Business Debit $100,000 Credit $40,000 Credit $120,000 Debit $60.000arrow_forward
- POM acquired 80% of the share of SOM for $26,550 on 1 Jan 2019, the date of acquisition (DOA). At this date, the equity of SOM consisted of share capital of $15,000 and retained earnings of $12,250. At 1 Jan 2019, all the identifiable assets and liabilities of SOM were recorded at fair value except for the following: Carrying amount Fair value Plant $7,500 $10,000 The plant had a remaining useful life of 5 years with depreciation based on the straight-line method. The fair value of the non-controlling interest (NCI) in SOM on DOA was $6,000. Tax rate is 10%. On 1 Jan 2021, POM acquired 30% of the shares of AOM for $7,450. Significance influence on AOM was obtained as a result. At this date, AOM's equity consisted of the share capital of $7,500 and retained earnings of $11,250. AOM made a profit of $5,200 for the year ended 31 Dec 2021. The following intra-group or inter-entity transactions happened in the period from 1 Jan 2021 to 31 Dec 2021 1. On 1 Jan 2021, POM held an inventory of…arrow_forwardOn 1 July 2020, Big Ltd acquired all the issued share capital of Small Ltd for cash for an amount of $1,050,000. On the date of the acquisition, the statements of the financial position of both entities are as follows: Big Ltd ($) Small Ltd ($) Assets Cash 21,000 10,500 Accounts receivable 315,000 115,500 Land 420,000 210,000 Plant 1,680,000 1,050,000 Investment in Small Ltd 1,050,000 3,486,000 1,386,000 Liabilities Accounts payable 126,000 63,000 Loans payable 840,000 315,000 Shareholders’ equity Share capital 2,100,000 420,000 Retained earnings 420,000 588,000 3,486,000 1,386,000 Required: a.Calculate the goodwill on acquisition assuming all net assets of small Ltd are recorded in fair value. b.Prepare consolidation journal entries. c.arrow_forwardOn January 1, 2020, HND Industrial Products Company acquired 400,000 shares at $ 50 per share of XYZ Cables Company, which represents 20% ownership. Required Record the following transactions in the books of HND Industrial Products Company. (assuming there is significant influence and insignificant influence) (a) Record the acquisition entry done by HND Company on January 1, 2020 (b) The XYZ Cables had reported net income of $ 800,000 for the year 2020 (c) XYZ cables announced and paid cash dividends of $ 200,000, (d) On December 31, 2020, XYZ Cables shares have been valued at $ 52 per share, and HND still owns 400,000 shares On December 31, 2021, XYZ Cables shares would be valued at $ 51 per share, and HND Company will own 400,000 sharesarrow_forward
- On 1 July 2020, Big Ltd acquired all the issued share capital of Small Ltd for cash for an amount of $1,050,000. On the date of the acquisition, the statements of the financial position of both entities are as follows: Big Ltd ($) Small Ltd ($) Assets Cash 21,000 10,500 Accounts receivable 315,000 115,500 Land 420,000 210,000 Plant 1,680,000 1,050,000 Investment in Small Ltd 1,050,000 3,486,000 1,386,000 Liabilities Accounts payable 126,000 63,000 Loans payable 840,000 315,000 Shareholders’ equity Share capital 2,100,000 420,000 Retained earnings 420,000 588,000 3,486,000 1,386,000 Required: a. Calculate the goodwill on acquisition assuming all net assets of small Ltd are recorded in fair value. b. Prepare consolidation journal entries. c.arrow_forwardOn 1 July 2019, BPL Ltd acquired all of the assets and liabilities of HTC Ltd. In exchange for these assets and liabilities, BPL Ltd issued 100 000 shares that at date of issue had a fair value of $4.95 per share. Costs of issuing these shares amounted to $1050. Legal costs associated with the acquisition of HTC Ltd amounted to $1520. The asset and liabilities of HTC Ltd at 1 July 2019 were as follows: Carrying amountFair value Assets: Cash$12 000$20 000 Accounts receivable10 50012 000 Inventory64 00071 000 Equipment 320 000239 000 Accumulated depreciation – equipment(96 000)— Patents240 000270 000 Liabilities: Accounts payable(16 000)(20 000) Debentures(64 000)(69 000) REQUIRED: a. Prepare the acquisition analysis at 1 July 2019 for the acquisition of HTC Ltd by BPL Ltd.arrow_forwardOn January 1, 2020, Allan Company bought a 15 percent interest in Sysinger Company. The acquisition price of $184,500 reflected an assessment that all of Sysinger’s accounts were fairly valued within the company’s accounting records. During 2020, Sysinger reported net income of $100,000 and declared cash dividends of $30,000. Allan possessed the ability to significantly influence Sysinger’s operations and, therefore, accounted for this investment using the equity method. On January 1, 2021, Allan acquired an additional 80 percent interest in Sysinger and provided the following fair-value assessments of Sysinger’s ownership components: Consideration transferred by Allan for 80% interest $ 1,400,000 Fair value of Allan's 15% previous ownership 262,500 Noncontrolling interest's 5% fair value 87,500 Total acquisition-date fair value for Sysinger Company $ 1,750,000 Also, as of January 1, 2021, Allan assessed a $400,000 value to an unrecorded…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