Question 1

On January 1, 20X1, 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, 20X1, 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, 20X1.

Accepted Answer

The answer of On January 1, 20X1, Parent Company purchased...

Question 2

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?

Accepted Answer

The answer of A parent company purchases an 80% interest...

Question 3

On December 31, 20X1, 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.

Accepted Answer

The answer of On December 31, 20X1, Parent Company purchased...

Question 4

Discuss the conditions under which the FASB would assume a presumption of control. Additionally, under what circumstances might the FASB require consolidation even though the parent does not control the subsidiary?

Accepted Answer

The answer of Discuss the conditions under which the FASB...

Question 5

On January 1, 20X1, Parent Company purchased 90% of the common stock of Subsidiary Company for $252,000. On this date, Subsidiary had total owners' equity of $240,000 consisting of $50,000 in common stock, $70,000 additional paid-in capital, and $120,000 in retained earnings.
On January 1, 20X1, 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.
Complete the valuation analysis schedule for this combination.
b.
Complete the determination and distribution schedule for this combination.
c.
Prepare, in general journal form, the elimination entries required to prepare a consolidated balance sheet for Parent and Subsidiary on January 1, 20X1.

Accepted Answer

The answer of On January 1, 20X1, Parent Company purchased...

Question 6

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 2-8 and complete the noncontrolling interest column.

Accepted Answer

The answer of Fortuna Company issued 70,000 shares of $1...

Question 7

On December 31, 20X1, 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:
  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 2-1 worksheet for a consolidated balance sheet as of December 31, 20X1.

Accepted Answer

The answer of On December 31, 20X1, Priority Company purchased...

Question 8

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, 20X1?
(1)
Inventory
_________
(2)
Property and plant
_________
(3)
Goodwill
_________
(4)
Noncontrolling interest
_________
b.
Prepare a valuation schedule
c.
Prepare a supporting determination and distribution of excess schedule.

Accepted Answer

The answer of Supernova Company had the following summarized balance...

Question 9

Answer the following based upon the above financial statements: 
a.
How much did Pepper Co. pay to acquire Salt Inc.?
b.
What was the fair value of Salt's Inventory at the time of acquisition?
c.
Was the book value of Salt's Building and Equipment overvalued or undervalued relative to the Building and Equipment's fair value at the time of acquisition?

Accepted Answer

The answer of  Answer the following based upon the...

Quiz 2: Consolidated Statements: Date of Acquisition

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?

Discuss the conditions under which the FASB would assume a presumption of control. Additionally, under what circumstances might the FASB require consolidation even though the parent does not control the subsidiary?