Exam 4: Consolidation of Wholly Owned Subsidiaries Acquired at More Than Book Value

Lea Company acquired all of Tenzing Corporation's stock on January 1,20X6 for $150,000 cash.On December 31,20X8,the trial balances of the two companies were as follows: Tenzing Corporation reported retained earnings of $75,000 at the date of acquisition.The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of five years from the date of acquisition.At December 31,20X8,Tenzing owed Lea $4,000 for services provided. -Based on the preceding information,what amount of total liabilities will be reported in the consolidated balance sheet for 20X8?

Pace Corporation acquired 100 percent of Spin Company's common stock on January 1,20X9.Balance sheet data for the two companies immediately following the acquisition follow: At the date of the business combination,the book values of Spin's net assets and liabilities approximated fair value except for inventory,which had a fair value of $60,000,and land,which had a fair value of $50,000.The fair value of land for Pace Corporation was estimated at $80,000 immediately prior to the acquisition. -Based on the preceding information,what is the differential associated with the acquisition?

Lea Company acquired all of Tenzing Corporation's stock on January 1,20X6 for $150,000 cash.On December 31,20X8,the trial balances of the two companies were as follows: Tenzing Corporation reported retained earnings of $75,000 at the date of acquisition.The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of five years from the date of acquisition.At December 31,20X8,Tenzing owed Lea $4,000 for services provided. -Based on the preceding information,what amount of total retained earnings will be reported in the consolidated balance sheet for the year 20X8?

On December 31,20X8,Mercury Corporation acquired 100 percent ownership of Saturn Corporation.On that date,Saturn reported assets and liabilities with book values of $300,000 and $100,000,respectively,common stock outstanding of $50,000,and retained earnings of $150,000.The book values and fair values of Saturn's assets and liabilities were identical except for land which had increased in value by $10,000 and inventories which had decreased by $5,000. -Based on the preceding information,what amount of goodwill will be reported if the acquisition price was $240,000?

Company X acquires 100 percent of the voting shares of Company Y for $275,000 on December 31,20X8.The fair value of the net assets of Company X at the date of acquisition was $300,000.This is an example of a(n):

West,Inc.holds 100 percent of the common stock of Coast Company,an investment acquired for $680,000.Immediately following the combination,West's net assets have a book value of $1,150,000 and a fair value of $1,390,000.The book value and the fair value of Coast's net assets on the date of combination are $400,000 and $550,000,respectively.Immediately following the combination,a consolidated balance sheet is prepared. -Based on the information given above,at what amount will West's investment in Coast stock be reported in the consolidated balance sheet?

Lea Company acquired all of Tenzing Corporation's stock on January 1,20X6 for $150,000 cash.On December 31,20X8,the trial balances of the two companies were as follows: Tenzing Corporation reported retained earnings of $75,000 at the date of acquisition.The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of five years from the date of acquisition.At December 31,20X8,Tenzing owed Lea $4,000 for services provided. -Based on the preceding information,what amount will be reported for total accounts payable in the consolidated balance sheet for the year 20X8?

Lea Company acquired all of Tenzing Corporation's stock on January 1,20X6 for $150,000 cash.On December 31,20X8,the trial balances of the two companies were as follows: Tenzing Corporation reported retained earnings of $75,000 at the date of acquisition.The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of five years from the date of acquisition.At December 31,20X8,Tenzing owed Lea $4,000 for services provided. -Based on the preceding information,all of the following are eliminating entries required on December 31,20X8,to prepare consolidated financial statements,except:

On December 31,20X9,Add-On Company acquired 100 percent of Venus Corporation's common stock for $300,000.Balance sheet information Venus just prior to the acquisition is given here: At the date of the business combination,Venus's net assets and liabilities approximated fair value except for inventory,which had a fair value of $60,000,land which had a fair value of $125,000,and buildings and equipment (net),which had a fair value of $250,000. -Based on the information provided,what amount of goodwill will be included in the consolidated balance sheet immediately following the acquisition?

On January 1,20X9,Wilton Company acquired all of Sirius Company's common shares,for $365,000 cash.On that date,Sirius's balance sheet appeared as follows: The fair values of all of Sirius's assets and liabilities were equal to their book values except for inventory that had a fair value of $85,000,land that had a fair value of $60,000,and buildings and equipment that had a fair value of $250,000.Buildings and equipment have a remaining useful life of 10 years with zero salvage value.Wilton Company decided to employ push-down accounting for the acquisition.Subsequent to the combination,Sirius continued to operate as a separate company. -Based on the preceding information,what amount will be present in the revaluation capital account,when eliminating entries are prepared?

Top Company obtained 100 percent of Bottom Company's common stock on January 1,20X6 by issuing 12,500 shares of its own common stock,which had a $5 par value and a $15 fair value on that date.Bottom reported a net book value of $150,000 and its shares had a $20 per share fair value on that date.However,some of its plant assets (with a 5-year remaining life)were undervalued by $20,000 in the company's accounting records.Bottom had also developed a customer list with an estimated fair value of $10,000 and a remaining life of 10 years.Top Company uses the equity-method to account for its investment in Bottom.During 20X6 Top and Bottom reported the following: Required: Prepare each of the journal entries listed below related to Top's investment in Bottom. 1.Top's acquisition of Bottom. 2.Top's share of Bottom's 20X6 income. 3.Top's share of Bottom's 20X6 dividend income. 4.Top's amortization of excess acquisition price.

On January 1,20X8,Chariot Company acquired 100 percent of Stryder Company for $220,000 cash.The trial balances for the two companies on December 31,20X8,included the following amounts: On the acquisition date,Stryder reported net assets with a book value of $170,000.A total of $10,000 of the acquisition price is applied to goodwill,which was not impaired in 20X8.Stryder's depreciable assets had an estimated economic life of 10 years on the date of combination.The difference between fair value and book value of tangible assets is related entirely to buildings and equipment.Chariot used the equity method in accounting for its investment in Stryder.Analysis of receivables and payables revealed that Stryder owed Chariot $10,000 on December 31,20X8. -Based on the information provided,what amount of total assets will be reported in the consolidated balance sheet for the year?

Pace Corporation acquired 100 percent of Spin Company's common stock on January 1,20X9.Balance sheet data for the two companies immediately following the acquisition follow: At the date of the business combination,the book values of Spin's net assets and liabilities approximated fair value except for inventory,which had a fair value of $60,000,and land,which had a fair value of $50,000.The fair value of land for Pace Corporation was estimated at $80,000 immediately prior to the acquisition. -Based on the preceding information,what amount of liabilities will be reported in the consolidated balance sheet prepared immediately after the business combination?

Tanner Company,a subsidiary acquired for cash,owned equipment with a fair value higher than the book value as of the date of combination.A consolidated balance sheet prepared immediately after the acquisition would include this difference in:

West,Inc.holds 100 percent of the common stock of Coast Company,an investment acquired for $680,000.Immediately following the combination,West's net assets have a book value of $1,150,000 and a fair value of $1,390,000.The book value and the fair value of Coast's net assets on the date of combination are $400,000 and $550,000,respectively.Immediately following the combination,a consolidated balance sheet is prepared. -Based on the information given above,goodwill will be reported in the consolidated balance sheet in the amount of:

Dish Corporation acquired 100 percent of the common stock of Toll Company by issuing 10,000 shares of $10 par common stock with a market value of $60 per share.Summarized balance sheet data for the two companies immediately preceding the acquisition are as follows: Required: Determine the dollar amounts to be presented in the consolidated balance sheet for (1)total assets, (2)total liabilities,and (3)total stockholders' equity.

Which of the following observations is NOT consistent with the use of push-down accounting?

Silver Corporation acquired 100 percent of Bronze Company on January 1,20X5,for $350,000.Following are selected account balances from Silver and Bronze Corporation as of December 31,20X5: Additional Information: 1.On January 1,20X5 the fair market value of Bronze's assets equaled their book value with the exception of Plant Assets (with an estimated economic life of 6 years)which had a fair market value in excess in Bronze's depreciable assets of $33,000. 2.Silver used the equity-method in accounting for its investment in Bronze. 3.Detailed analysis of receivables and payables showed that Bronze owed Silver $10,000 on December 31,20X5. Required: a.Give all journal entries recorded by Silver with regard to its investment in Bronze during 20X5. b.Give all eliminating entries needed to prepare a full set of consolidated financial statements for 20X5. c.Prepare a three-part consolidation worksheet as of December 31,20X5.

On January 1,20X8,Chariot Company acquired 100 percent of Stryder Company for $220,000 cash.The trial balances for the two companies on December 31,20X8,included the following amounts: On the acquisition date,Stryder reported net assets with a book value of $170,000.A total of $10,000 of the acquisition price is applied to goodwill,which was not impaired in 20X8.Stryder's depreciable assets had an estimated economic life of 10 years on the date of combination.The difference between fair value and book value of tangible assets is related entirely to buildings and equipment.Chariot used the equity method in accounting for its investment in Stryder.Analysis of receivables and payables revealed that Stryder owed Chariot $10,000 on December 31,20X8. -Based on the information provided,the amount of differential assigned to buildings and equipment that is amortized for the year is:

Pace Corporation acquired 100 percent of Spin Company's common stock on January 1,20X9.Balance sheet data for the two companies immediately following the acquisition follow: At the date of the business combination,the book values of Spin's net assets and liabilities approximated fair value except for inventory,which had a fair value of $60,000,and land,which had a fair value of $50,000.The fair value of land for Pace Corporation was estimated at $80,000 immediately prior to the acquisition. -Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet prepared immediately after the business combination?