Exam 3: Consolidated Financial Statements-Date of Acquisition

In which of the following cases would consolidation be inappropriate?

On the consolidated balance sheet, consolidated stockholders' equity is:

Price Company acquired 75 percent of the common stock of Shandie Corporation on December 31, 2016. On the date of acquisition, Price held land with a book value of $150,000 and a fair value of $300,000; Shandie held land with a book value of $100,000 and fair value of $500,000. What amount would land be reported in the consolidated balance sheet prepared immediately after the combination?

Pina Corp. owns 60% of Simon Corp.'s outstanding common stock. On May 1, 2016, Pina advanced Simon $90,000 in cash, which was still outstanding at December 31, 2016. What portion of this advance should be eliminated in the preparation of the December 31, 2016 consolidated balance sheet?

There are several reasons why a company would acquire a subsidiary's voting common stock rather than its net assets. Identify at least two advantages to acquiring a controlling interest in the voting stock of another company rather than its assets.

P Company purchased 80% of the outstanding common stock of S Company on January 2, 2016, for $380,000. Balance sheets for P Company and S Company immediately after the stock acquisition were as follows: S Company owed P Company $16,000 on open account on the date of acquisition. Required: Prepare a consolidated balance sheet for P and S Companies on the date of acquisition. Any difference between the value implied by the purchase price of the investment and the book value of net assets acquired relates to subsidiary land. The book values of S Company's other assets and liabilities are equal to their fair values.

Eliminating entries are made to cancel the effects of intercompany transactions and are made on the:

Reasons a parent company may pay more than book value for the subsidiary company's stock include all of the following EXCEPT:

On January 1, 2016, Pent Company and Shelter Company had condensed balance sheets as follows: On January 2, 2016 Pent borrowed $180,000 and used the proceeds to purchase 90% of the outstanding common stock of Shelter. This debt is payable in 10 equal annual principal payments, plus interest, starting December 30, 2016. Any difference between book value and the value implied by the purchase price relates to land. On Pent's January 2, 2016 consolidated balance sheet, current liabilities should be:

What is the method of presentation required by SFAS 160 of "non-controlling interest" on a consolidated balance sheet?

On December 31, 2016, Pinta Company purchased 80% of the outstanding common stock of Snead Company for cash. At the time of acquisition, Snead Company's balance sheet was as follows: Required: Prepare the elimination entry(s) required for the preparation of a consolidated balance sheet workpaper on December 31, 2016, assuming the purchase price of the stock was $1,670,000. Any difference between the value implied by the purchase price of the investment and the book value of net assets acquired relates to subsidiary land.

On January 1, 2016, Pent Company and Shelter Company had condensed balance sheets as follows: On January 2, 2016 Pent borrowed $180,000 and used the proceeds to purchase 90% of the outstanding common stock of Shelter. This debt is payable in 10 equal annual principal payments, plus interest, starting December 30, 2016. Any difference between book value and the value implied by the purchase price relates to land. On Pent's January 2, 2016 consolidated balance sheet, noncurrent assets should be:

A majority-owned subsidiary that is in legal reorganization should normally be accounted for using:

On January 1, 2016, Pell Company and Sand Company had condensed balance sheets as follows: On January 2, 2016 Pell borrowed $240,000 and used the proceeds to purchase 90% of the outstanding common stock of Sand. This debt is payable in 10 equal annual principal payments, plus interest, starting December 30, 2016. Any difference between book value and the value implied by the purchase price relates to land. On Pell's January 2, 2016 consolidated balance sheet, current liabilities should be:

The main evidence of control for purposes of consolidated financial statements involves:

On January 2, 2016, Pope Company acquired 90% of the outstanding common stock of Smithwick Company for $480,000 cash. Just before the acquisition, the balance sheets of the two companies were as follows: The fair values of Smithwick's assets and liabilities are equal to their book values with the exception of land. Required: A. Prepare the journal entry necessary to record the purchase of Smithwick's common stock. B. Prepare a consolidated balance sheet at the date of acquisition.

Prepare in general journal form the workpaper entries to eliminate Porter Company's investment in Sewell Company in the preparation of a consolidated balance sheet at the date of acquisition for each of the following independent cases: Any difference between book value of net assets acquired and the value implied by the purchase price relates to subsidiary property, plant, and equipment except for case (b). In case (b) assume that all book values and fair values are the same.

Under the acquisition method, indirect costs relating to acquisitions should be:

On January 1, 2016, Prima Corporation acquired 80 percent of Sunder Corporation's voting common stock. Sunders's buildings and equipment had a book value of $300,000 and a fair value of $350,000 at the time of acquisition. At what amount will Sunder's buildings and equipment will be reported in the consolidated statements?

A useful first step in the consolidating process is to prepare a Computation and Allocation of Difference (CAD) Schedule. Identify the steps involved in preparing the CAD schedule.