Assume a parent company acquires its subsidiary by paying $1,200,000 for all of the outstanding voting...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Assume a parent company acquires its subsidiary by paying $1,200,000 for all of the outstanding voting shares of the investee. On the acquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipment with a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent and subsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidiary: Parent Subsidiary Assets: Cash & receivables $ 800,000 $ 100,000 Inventory 600,000 200,000 Property & equipment, net 2.300,000 775,000 Equity investment 1,200,000 Licenses 25,000 $ 4,900,000 $ 1,100,000 Liabilities and stockholders' equity: Current liabilities $ 400,000 $ 150.000 Other liabilities 300,000 Note payable 350.000 Common stock 1,670,000 100,000 APIC 1,430,000 200,000 Retained earnings 1,100,000 300,000 $ 4,900,000 $1,100,000 a. Compute the amount of goodwill implicit in the acquisition of the subsidiary. $ 100,000 b. Assume the subsidiary elects to apply pushdown accounting immediately after the above financial statements were prepared. Provide the journal entries required for the subsidiary to apply pushdown accounting. Description Debit Credit Property & equipment, net 150,000 v Licenses 250,000 v Goodwill 200,000 v Pushdown equity 600,000 v 0 x c. Prepare the consolidation entry or entries on the date of acquisition, assuming the subsidiary applied pushdown accounting. Description Debit Credit [E] Common stock 100,000 v APIC 200,000 v Retained earnings 300,000 x Pushdown equity 600,000 x d. Prepare the consolidated balance sheet on the date of acquisition. Consolidated Balance Sheet Assets: Cash & receivables 100,000 x Inventory 200,000 x Property & equipment, net 925,000 x Licenses 275,000 v d. Prepare the consolidated balance sheet on the date of acquisition. Consolidated Balance Sheet Assets: Cash & receivables 100,000 x Inventory 200,000 x Property & equipment, net 925,000 x Licenses 275.000 Goodwill 200,000 1,700,000 x Liabilities and stockholders' equity: Current liabilities 150,000 x Other liabilities Note payable 350,000 Common stock 1,670,000 APIC 1,430,000 Retained earnings 1,100,000 4,700,000 x Assume a parent company acquires its subsidiary by paying $1,200,000 for all of the outstanding voting shares of the investee. On the acquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipment with a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent and subsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidiary: Parent Subsidiary Assets: Cash & receivables $ 800,000 $ 100,000 Inventory 600,000 200,000 Property & equipment, net 2.300,000 775,000 Equity investment 1,200,000 Licenses 25,000 $ 4,900,000 $ 1,100,000 Liabilities and stockholders' equity: Current liabilities $ 400,000 $ 150.000 Other liabilities 300,000 Note payable 350.000 Common stock 1,670,000 100,000 APIC 1,430,000 200,000 Retained earnings 1,100,000 300,000 $ 4,900,000 $1,100,000 a. Compute the amount of goodwill implicit in the acquisition of the subsidiary. $ 100,000 b. Assume the subsidiary elects to apply pushdown accounting immediately after the above financial statements were prepared. Provide the journal entries required for the subsidiary to apply pushdown accounting. Description Debit Credit Property & equipment, net 150,000 v Licenses 250,000 v Goodwill 200,000 v Pushdown equity 600,000 v 0 x c. Prepare the consolidation entry or entries on the date of acquisition, assuming the subsidiary applied pushdown accounting. Description Debit Credit [E] Common stock 100,000 v APIC 200,000 v Retained earnings 300,000 x Pushdown equity 600,000 x d. Prepare the consolidated balance sheet on the date of acquisition. Consolidated Balance Sheet Assets: Cash & receivables 100,000 x Inventory 200,000 x Property & equipment, net 925,000 x Licenses 275,000 v d. Prepare the consolidated balance sheet on the date of acquisition. Consolidated Balance Sheet Assets: Cash & receivables 100,000 x Inventory 200,000 x Property & equipment, net 925,000 x Licenses 275.000 Goodwill 200,000 1,700,000 x Liabilities and stockholders' equity: Current liabilities 150,000 x Other liabilities Note payable 350,000 Common stock 1,670,000 APIC 1,430,000 Retained earnings 1,100,000 4,700,000 x
Expert Answer:
Related Book For
Fundamentals of Advanced Accounting
ISBN: 978-0077862237
6th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
Posted Date:
Students also viewed these accounting questions
-
Assume the Parent company acquires its subsidiary by exchanging 35,000 shares of its Common Stock, with a fair value on the acquisition date of $60 per share, for all of the outstanding voting shares...
-
Assume a parent company acquires 80% of the outstanding voting common stock of a subsidiary on January 1, 2018. One the acquisition date, the identifiable net assets of the subsidiary had fair value...
-
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,264,500 in cash. Allison intends to maintain Mathlas as a wholly owned...
-
Single PlantwideandMultiple Production Department Factory Overhead Rate Methodsand Product Cost Distortion The management of Nova Industries Inc. manufactures gasoline and diesel engines through two...
-
For each of these message needs, choose a medium that you think would work effectively and explain your choice. (More than one medium could work in some cases; just be able to support your particular...
-
According to the FLSA, what is the basis used to determine overtime worked for standard nonexempt workers? 1. The 8 and 80 rule 2. The excess over 40 hours during any pay period 3. The excess over 40...
-
The following are the number of pounds per day shipped by a trucking company. It is suggested that the shipments be treated as a process. Because these data are not symmetrically distributed, you...
-
Here is information related to Shashko Company for 2012. Total credit sales ............ $1,500,000 Accounts receivable at December 31 .... 840,000 Bad debts written off ........... 37,000...
-
Discuss the role of human factors in hazard analysis. How do techniques like Human Reliability Analysis (HRA) contribute to understanding and mitigating risks associated with human errors in...
-
Oil (sp. gr. = 0.8) flows smoothly through the circular reducing section shown at 3 ft 3 /s. If the entering and leaving velocity profiles are uniform, estimate the force that must be applied to the...
-
Exercises EX 3.1 Write a statement that prints the number of characters in a String object called overview. Fx32 XX 3.2 Write a statement that prints the 8th character of a String object called...
-
How do endocytosis and exocytosis move materials into and out of cells?
-
Why are electron microscopes particularly useful to cell biologists?
-
How do cells regulate enzymes?
-
What are the end products of mitosis?
-
Two different bacteria have radii of 1 micrometer and 5 micrometers. What is the surface area of each cell? How does the surface area compare with the volume for each cellthat is, what is the...
-
A loan of $100,000 is repaid with monthly payments of $1000 at the end of each month, and a smaller final payment one month after the last regular payment, at a nominal interest rate of (12)=0.06....
-
Suppose the index goes to 18 percent in year 5. What is the effective cost of the unrestricted ARM?
-
Tree, Inc. has held a 10percent interest in the stock of Limb Company for several years. Because of the level of ownership, this investment has been accounted for using the fair-value method. At the...
-
Neill Company purchases 80 percent of the common stock of Stamford Company on January 1, 2013, when Stamford has the following stockholders equity accounts: Common stock40,000 shares...
-
What are the two fund financial statements for governmental funds? What information does each normally present?
-
Match List-I (parts) with dist-II (Method of holding on a lathe) and select the correct answer using the codes given below the lists : List-I (parts) A. Cylindrical parts B. Non-cylindrical parts C....
-
How machine tools are classified according to the following criteria : (a) Field of application. (b) Accuracy (c) Weight (d) Processing operations.
-
What are the function performed by a machine tool?
Study smarter with the SolutionInn App