Exam 2: Consolidated Statements: Date of Acquisition

On January 1, 2016, 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, 2016, 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, 2016.? ? ?

Consolidated financial statements are designed to provide:

Exercise Assume that Organic Food, Inc.issued 10,000 shares of its $5 par value common stock for 100% of the outstanding shares of JMJ Meats Company.The fair value of a share of the Organic stock is $15.Organic Food, Inc.also paid $12,000 in accounting and legal fees to complete the purchase.Make the necessary entry that Organic Food, Inc.would make to record the purchase including the entry to record the costs of the acquisition.

Pesto Company paid $8 per share to acquire 80% of Sauce Company's 100,000 outstanding shares.The fair value of Sauce's net assets at the time of the acquisition was $850,000.In this case:

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?

When there is a consolidation with a noncontrolling interest, the following is true with respect to what can happen with less than a 100% ownership interest consolidation EXCEPT FOR: Subsidiary accounts are adjusted to partial fair value based on the controlling interest percentage. The entire amount of every subsidiary nominal account is merged with the nominal accounts of the parent to calculate consolidated income. The parent's investment account is eliminated against only its ownership percentage of the underlying subsidiary equity accounts. All of the above are true

An investor prepares a single set of financial statements which encompasses the financial results for both it and its investee because:

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 pertaining to Super Company are available: Book Value Fair Value Current assets \ 300,000 \ 600,000 Land and building 600,000 900,000 Machinery 500,000 600,000 Goodwill 100,000 ? The amount of machinery that will be included in on the consolidated balance sheet is:

Mans Company is about to purchase the net assets of Eagle Inc., which has the following balance sheet: ? ? Mans has secured the following fair values of Eagle's accounts: ? ? Inventory \ 130,000 Equipment 60,000 Land and buildings 260,000 Bonds payable 60,000 Acquisition costs were $20,000. ? Required: ? Record the entry for the purchase of the net assets of Eagle by Mans at the following cash prices: ? a.$450,000 ? ? b.$310,000 ? ? c.$480,000 ?

A subsidiary was acquired for cash in a business combination on December 31, 2016.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, 2016, would

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: 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.The journal entry to record the purchase of Stonebriar would include a

On December 31, 2016, 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: ? ? Book Fair Value Value Current assets \ 500,000 \ 800,000 Accounts receivable 200,000 150,000 Inventory 800,000 800,000 Land 100,000 600,000 Buildings and equipment, net 700,000 900,000 Current liabilities 800,000 875,000 Bonds payable 850,000 930,000 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 2-3 worksheet for a consolidated balance sheet as of December 31, 2016.? ?

On June 30, 2016, 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, 2016, should report

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, 2016? ? ? ? (1) Inventory _________ ? ? (2) Property and plant _________ ? ? (3) Goodwill _________ ? ? (4) Non-controlling 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: Book Value Fair Value Current assets \ 100,000 \ 200,000 Land and building 200,000 200,000 Machinery 300,000 600,000 Goodwill 100,000 ? The machinery will appear on the consolidated balance sheet at ____.

Which of the following is not true of the consolidation process for a stock 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: 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?

An investor records its share of its investee's income as a separate source of income because:

When it purchased Sutton, Inc.on January 1, 2016, 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: Sutton Common stock \ 4,000,000 \ 700,000 Paid-in capital in excess of par 7,500,000 900,000 Retained earnings 5,500,000 500,000 Total \ 17,000,000 \ 2,100,000 Immediately after the purchase, the consolidated balance sheet should report paid-in capital in excess of par of

Supernova Company had the following summarized balance sheet on December 31 of the current year: ? ? Assets Accounts receivable \ 200,000 Inventory 450,000 Property and plant (net) 600,000 Goodwill 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 \ 1,400,000 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.