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

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 total assets will appear in the consolidated balance sheet prepared immediately after the business combination?

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

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 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:

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?

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 inventory will be included in the consolidated balance sheet immediately following the acquisition?

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?

On July 1, 20X9, Link Corporation paid $340,000 for all of Tinsel Company's outstanding common stock. On that date, the costs and fair values of Tinsel's recorded assets and liabilities were as follows: -Based on the preceding information, the differential reflected in a consolidation worksheet to prepare a consolidated balance sheet immediately after the business combination is:

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 differential associated with this acquisition is:

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 net income will be reported in the consolidated financial statements for the year?

Enya Corporation acquired 100 percent of Celtic Corporation's common stock on January 1, 20X9. Summarized balance sheet information for the two companies immediately after the combination is provided: -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:

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?

On January 1, 20X8, Blake Company acquired all of Frost Corporation's voting shares for $280,000 cash. On December 31, 20X9, Frost owed Blake $5,000 for services provided during the year. When consolidated financial statements are prepared for 20X9, which entry is needed to eliminate intercompany receivables and payables in the consolidation worksheet?

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 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 will be included as investment in Venus Corporation in the consolidated balance sheet immediately following the acquisition?

Which term refers to the practice of revaluing an acquired subsidiary's assets and liabilities to their fair values directly on that subsidiary's books at the date of 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 will be reported for total accounts payable in the consolidated balance sheet for the year 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, at what amount should total land be reported in the consolidated balance sheet prepared immediately after the business combination?

Enya Corporation acquired 100 percent of Celtic Corporation's common stock on January 1, 20X9. Summarized balance sheet information for the two companies immediately after the combination is provided: -Based on the preceding information, the amount of differential associated with the acquisition is:

Paco Company acquired 100 percent of the stock of Garland Corp. on December 31, 20X8. The stockholder's equity section of Garland's balance sheet at that date is as follows: Paco financed the acquisition by using $880,000 cash and giving a note payable for $400,000. Book value approximated fair value for all of Garland's assets and liabilities except for buildings which had a fair value $60,000 more than its book value and a remaining useful life of 10 years. Any remaining differential was related to goodwill. Paco has an account payable to Garland in the amount of $30,000. Required: 1) Present all eliminating entries needed to prepare a consolidated balance sheet immediately following the acquisition. 2) What additional eliminating entry must be prepared at December 31, 20X9?