Exam 2: Consolidated Statements: Date of Acquisition

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. What is the amount of property, plant and equipment that will be included in the consolidated balance sheet immediately after the acquisition?

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.

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 ____.

The SEC requires the use of push-down accounting in some specific situations. Push-down accounting results in:

Supernova Company had the following summarized balance sheet on December 31 of the current year: 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 per 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 entries will Redstar Corporation record for the investment in Supernova and issuance of stock? 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.

In an asset acquisition:

Which of the following statements about consolidation is not true?

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

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.

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 2-9 and complete the noncontrolling interest column.

The following consolidated financial statement was prepared immediately following the acquisition of Salt, Inc. by Pepper Co. 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?

How is the noncontrolling interest treated in the consolidated balance sheet?

On April 1, 20X1, Paape Company paid $950,000 for all the issued and outstanding stock of Simon Corporation. The recorded assets and liabilities of the Simon Corporation on April 1, 20X1, follow: On April 1, 20X1, it was determined that the inventory of Simon had a fair value of $190,000, and the property and equipment (net) had a fair value of $560,000. The entry to distribute the excess of fair value over book value will include:

On April 1, 20X1, Paape Company paid $950,000 for all the issued and outstanding stock of Simon Corporation. The recorded assets and liabilities of the Simon Corporation on April 1, 20X1, follow: On April 1, 20X1, it was determined that the inventory of Simon had a fair value of $190,000, and the property and equipment (net) had a fair value of $560,000. What is the amount of goodwill resulting from the business combination?

Consolidated financial statements are designed to provide:

Consolidated financial statements are appropriate even without a majority ownership if which of the following exists:

Pinehollow acquired 80% of the outstanding stock of Stonebriar by issuing 80,000 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. What is the amount of goodwill that will be included in the consolidated balance sheet immediately following the acquisition?

Supernova Company had the following summarized balance sheet on December 31 of the current year: 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 per 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 entries will Redstar Corporation record for the investment in Supernova and issuance of stock? 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.

Which of the following is true of the consolidation process?

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