Exam 2: Consolidated Statements: Date of Acquisition

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: ? ? Assets Pinehollow Stonebriar Cash \ 150,000 \ 50,000 Accounts receivable 500,000 350,000 Inventory 900,000 600,000 Property, plant, and equipment (net) 900,000 Total assets \ 3,400,000 \ 1,900,000 Liabilities and Stockholders' Equity Current liabilities \ 300,000 \ 100,000 Bonds payable 1,000,000 600,000 Common stock ( \ 1 par) 300,000 100,000 Paid-in capital in excess of par 800,000 900,000 Retained earnings Total liabilities and equity \ 3,400,000 \ 1,900,000 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?

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

How is the non-controlling interest treated in the consolidated balance sheet?

Which of the following statements about consolidation is not true?

On April 1, 2016, 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, 2016, follow: Cash \ 80,000 Inventory 240,000 Property and equipment (net of accumulated depreciation of \ 320,000) 480,000 Liabilities (180,000) On April 1, 2016, 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?

Supernova Company had the following summarized balance sheet on December 31 of the current year: ? ? Assets Accounts receivable \ 350,000 Inventory 450,000 Property and plant (net) \ Total \ Liabilities and Equity Notes payable \ 600,000 Common stock, \ 5 par 300,000 Paid-in capital in excess of par 400,000 Retained earnings 100,000 Total \ 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 not an advantage of the parent issuing shares of stock in exchange for the subsidiary common shares being acquired?

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

On April 1, 2016, 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, 2016, follow: Cash \ 80,000 Inventory 240,000 Property and equipment (net of accumulated depreciation of \ 320,000) 480,000 Liabilities (180,000) On April 1, 2016, 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 December 31, 2016, 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.

Discuss the conditions under which the SEC would assume a presumption of control.Additionally, under what circumstances might consolidation be required even though the parent does not control the subsidiary? When would it not be appropriate to consolidate when more than 50% of the voting stock is held?

In an asset acquisition:

Pesto Company paid $10 per share to acquire 80% of Sauce Company's 100,000 outstanding shares; however the market price of the remaining shares was $8.50.The fair value of Sauce's net assets at the time of the acquisition was $850,000.In this case, where Pesto paid a premium to achieve control:

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:

Which of the following is true of the consolidation process?

Consolidation might not be appropriate even when the majority owner has control if:

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

Pinehollow acquired 70% of the outstanding stock of Stonebriar by issuing 70,000 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: Assets Pinehollow Stonebriar Cash \ 150,000 \ 50,000 Accounts receivable 500,000 350,000 Inventory 900,000 600,000 Property, plant, and equipment (net) 900,000 Total assets \ 3,400,000 \ 1,900,000 Liabilities and Stockholders' Equity Current liabilities \ 300,000 \ 100,000 Bonds payable 1,000,000 600,000 Common stock ( \ 1 par) 300,000 100,000 Paid-in capital in excess of par 800,000 900,000 Retained earnings Total liabilities and equity \ 3,400,000 \ 1,900,000 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 the non-controlling interest that will be included in the consolidated balance sheet immediately after the acquisition

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 non-controlling interest column.? Figure 2-9 Fortuna Co.and Subsidiary Acappella Co.Partial Worksheet for Consolidated Financial Statements January 2, 2016 ? ? ? ? Balance Sheet ? Account Titles Fortuna Acappella Current Assets 2,100,000 960,000 ? ? ? Property, Plant, and ? ? Equipment 4,600,000 1,300,000 Investment in Acappella 1,400,000 ? ? ? ? Goodwill ? 240,000 Liabilities (3,000,000) (800,000) Common Stock - Fortuna (870,000) ? Paid-in Capital in Excess ? ? of Par - Fortuna (3,530,000) ? Retained Earnings - Fortuna (700,000) ? Common Stock - Acappella ? (200,000) Paid-in Capital in Excess ? ? of Par - Acappella ? (300,000) Retained Earnings - Acappella ? (1,200,000) ? ? ? ? ? ? ? ? ? ? ? ? ?

Pagach Company purchased 100% of the voting common stock of Rage Company for $1,800,000.The following book and fair values are available: Book Value Fair Value Current assets \ 150,000 \ 300,000 Land and building 280,000 280,000 Machinery 400,000 700,000 Bonds payable (300,000) (250,000) Goodwill 150,000 ? The bonds payable will appear on the consolidated balance sheet