On December 30, 20X5, the statements of financial position of the Perk Company and the Scent Company
Question:
For both companies, the fair values of their identifiable assets and liabilities are equal to their carrying values except for the following fair values:
The following cases are independent:
1. On December 31, 20X5, Perk Company purchases the net assets of Scent Company for $ 5.5 million in cash. Scent Company distributes the proceeds to its shareholders in return for their shares, cancels the shares, and ceases to exist as a separate legal entity.
2. On December 31, 20X5, Perk Company purchases 75% of the outstanding voting shares of Scent Company for $ 4.5 million in cash. Scent Company continues to operate as a separate legal entity.
Required
For each of the two independent cases, prepare a consolidated SFP for Perk Company at December 31, 20X5, subsequent to the business combination. For the second case, prepare a consolidated SFP using each of the following four methods.
1. Proportionate consolidation
2. Parent-company
3. Parent- company extension
4.Entity
Step by Step Answer:
Advanced Financial Accounting
ISBN: 978-0137030385
6th edition
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay