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advanced financial accounting

Questions and Answers of Advanced Financial Accounting

Purple Company owns 90 percent of the common stock and 60 percent of the preferred stock of Sage Corporation, both acquired at underlying book value on January 1, 20X1. At that date, the fair value
Sound Manufacturing Corporation prepared the following balance sheet as of January 1, 20X8:The company is considering a 2-for-1 stock split, a stock dividend of 4,000 shares, or a stock dividend of
Pepper Enterprises owns 95 percent of Salt Corporation. On January 1, 20X1, Salt issued $200,000 of five-year bonds at 115. Annual interest of 12 percent is paid semiannually on January 1 and July 1.
Par Corporation holds 60 percent of Short Publishing Company’s voting shares. Par issued $500,000 of 10 percent bonds with a 10-year maturity on January 1, 20X2, at 90. On January 1, 20X8, Short
Stallion Corporation sold $100,000 par value, 10-year first mortgage bonds to Pony Corporation on January 1, 20X5. The bonds, which bear a nominal interest rate of 12 percent, pay interest
Assume the same facts as in P8–15 except for the changes in the trial balances, but prepare entries using straight-line amortization of bond discount or premium.Requireda. Record the journal entry
On January 1, 20X1, Prize Corporation paid Morton Advertising $116,200 to acquire 70 percent of Statue Company’s stock. Prize also paid $45,000 to acquire $50,000 par value 8 percent, 10-year bonds
Pro Corporation purchased 11,000 shares of Schroeder Corporation on January 1, 20X3, at book value. At that date, the fair value of the noncontrolling interest was equal to 26.6 percent of
Palace Corporation owns 80 percent of the common shares and 70 percent of the preferred shares of Surf Company, all purchased at underlying book value on January 1, 20X2. At that date, the fair value
Plant Advertising Corporation acquired 60 percent of Seed Manufacturing Company’s shares on December 31, 20X1, at underlying book value of $180,000. At that date, the fair value of the
Azure Enterprises acquired 90 percent of Brown Corporation’s voting common stock on January 1, 20X3, for $315,000. At that date, the fair value of the noncontrolling interest of Brown Corporation
Stake Company reported the following summarized balance sheet data as of December 31, 20X2:Stake issues 4,000 additional shares of its $10 par value stock to its shareholders as a stock dividend on
Peel Corporation purchased 60 percent of Split Products Company’s shares on December 31, 20X7, for $210,000. At that date, the fair value of the noncontrolling interest was $140,000. On January 1,
Pepper Home Builders Inc. acquired 80 percent of Salty Concrete Works stock on January 1, 20X3, for $360,000. At that date, the fair value of the noncontrolling interest was $90,000. Salty
Pea Corporation acquired 80 percent of Split Company’s stock on January 1, 20X1, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of
Plug Corporation purchased $100,000 par value bonds of its subsidiary, Spark Company, on December 31, 20X5, from Lemon Corporation. The 10-year bonds bear a 9 percent coupon rate, and Spark
School Perfume Company issued $300,000 of 10 percent bonds on January 1, 20X2, at 110. The bonds mature 10 years from issue and have semiannual interest payments on January 1 and July 1. Parsons
Series Corporation issued $500,000 par value 10-year bonds at 104 on January 1, 20X1, which Independent Corporation purchased. On July 1, 20X5, Playoff Corporation purchased $200,000 of Series bonds
Purple Manufacturing purchased 60 percent of the ownership of Socks Corporation stock on January 1, 20X1, at underlying book value. At that date, the fair value of the noncontrolling interest was
Patio Corporation owns 60 percent of the stock of Stone Container Company, which it acquired at book value in 20X1. At that date, the fair value of the noncontrolling interest was equal to 40 percent
Puzzle Corporation purchased 75 percent of Sunday Company’s common stock at underlying book value on January 1, 20X3. At that date, the fair value of the noncontrolling interest was equal to 25
Apple Corporation acquires 80 percent of Berry Corporation’s common shares on January 1, 20X2. On January 2, 20X2, Berry acquires 60 percent of Coco Corporation’s common stock. Information on
Playtown Corporation purchased 75 percent of Sandbox Corporation common stock and 40 percent of its preferred stock on January 1, 20X6, for $270,000 and $80,000, respectively. At the time of
Playtown Corporation purchased 75 percent of Sandbox Company common stock and 40 percent of its preferred stock on January 1, 20X6, for $270,000 and $80,000, respectively. At the time of purchase,
On January 1, 20X2, Plier Corporation purchased 90 percent of Saw Company common shares and 60 percent of its preferred shares at underlying book value. At that date, the fair value of the
Parent Corporation owns 70 percent of Sister Corporation’s common stock and 25 percent of Brother Corporation’s common stock. In addition, Sister owns 40 percent of Brother’s stock. In 20X6,
Acorn Corporation owns 80 percent of Beet Corporation’s common stock. It purchased the shares on January 1, 20X1, for $520,000. At the date of acquisition, the fair value of the noncontrolling
Platinum Corporation acquired 10,500 shares of the common stock and 800 shares of the 8 percent preferred stock of Silver Company on December 31, 20X4, at the book value of the underlying stock
Phoster Corporation established Skine Company as a wholly owned subsidiary. Phoster reported the following balance sheet amounts immediately before and after it transferred assets and accounts
Planter Corporation used debentures with a par value of $625,000 to acquire 100 percent of Sorden Company’s net assets on January 1, 20X2. On that date, the fair value of the bonds issued by
Pun Corporation concluded the fair value of Slender Company was $60,000 and paid that amount to acquire its net assets. Slender reported assets with a book value of $55,000 and fair value of $71,000
Palm Corporation and Staple Company have announced terms of an exchange agreement under which Palm will issue 8,000 shares of its $10 par value common stock to acquire all of Staple Company’s
One company may acquire another for a number of different reasons. The acquisition often has a significant impact on the financial statements. In 2017, AT&T Corporation acquired Time Warner.
Permott Corporation has been in the midst of a major expansion program. Much of its growth had been internal, but in 20X1 Permott decided to continue its expansion through the acquisition of other
Using the data presented in E1–13, determine the amount Planter Corporation would record as a gain on bargain purchase and prepare the journal entry Planter would record at the time of the exchange
On January 1, 20X1, Porta Corporation purchased Swick Company’s net assets and assigned goodwill of $80,000 to Reporting Division K. The following assets and liabilities are assigned to Reporting
Practical Corporation acquired all of the common stock of Simple Company for $450,000 on January 1, 20X4. On that date, Simple’s identifiable net assets had a fair value of $390,000. The assets
On January 1, 20X7, Proft Company purchased Strobe Company’s net assets and assigned them to four separate reporting units. Total goodwill of $176,000 is assigned to the reporting units as
Plasher Company has a reporting unit resulting from an earlier business combination. The reporting unit’s current assets and liabilities areRequiredDetermine the amount of goodwill to be reported
Prant Company acquired all of Sedford Corporation’s assets and liabilities on January 1, 20X2, in a business combination. At that date, Sedford reported assets with a book value of $624,000 and
Describe an investor’s treatment of an investment in common stock that was previously carried at fair value, if the investment becomes qualified for use of the equity method by an increase in the
Peace Computer Corporation acquired 90 percent of Symbol Software Company’s common stock on January 2, 20X3, by issuing preferred stock with a par value of $6 per share and a market value of $8.10
Peace Computer Corporation acquired 75 percent of Symbol Software Company’s stock on January 2, 20X3, by issuing bonds with a par value of $50,000 and a fair value of $67,500 in exchange for the
On July 1, 20X2, Alan Enterprises merged with Terry Corporation through an exchange of stock and the subsequent liquidation of Terry. Alan issued 200,000 shares of its stock to effect the
The following financial statement information was prepared for Plue Corporation and Sparse Company at December 31, 20X2:Plue and Sparse agreed to combine as of January 1, 20X3. To effect the merger,
Punyain Company acquired Sallsap Corporation on January 1, 20X1,bthrough an exchange of common shares. All of Sallsap’s assets and liabilities were immediately transferred to Punyain, which
The following balance sheets were prepared for Pam Corporation and Slest Company on January 1, 20X2, just before they entered into a business combination:Pam acquired all of Slest Company’s assets
Pesto Corporation acquired 70 percent of Sauce Corporation’s common stock on January 1, 20X7, for $294,000 in cash. At the acquisition date, the book values and fair values of Sauce’s assets and
Plug Motors’ accountant was called away after completing only half of the consolidated statements at the end of 20X4. The data left behind included the following:a. Plug Motors acquired shares of
On January 1, 20X3, Parade Corporation reported total assets of $470,000, liabilities of $270,000, and stockholders’ equity of $200,000. At that date, Summer Corporation reported total assets of
Pawn Company acquired 90 percent of the voting common shares of Shop Corporation by issuing bonds with a par value and fair value of $121,500 to Shop’s existing shareholders. Immediately prior to
Pepper Corporation owns 70 percent of Salt Company’s stock. In the 20X9 consolidated income statement, the noncontrolling interest was assigned $18,000 of income. There was no differential in the
Pony Corporation acquired all of Stallion Company’s common shares on January 1, 20X5, for $180,000. On that date, the book value of the net assets reported by Stallion was $150,000. The entire
Plump Corporation acquired 100 percent of Slim Corporation’s common stock on December 31, 20X2, for $189,000. Data from the balance sheets of the two companies included the following amounts as of
Stick Corporation is a wholly owned subsidiary of Point Corporation. Point acquired ownership of Stick on January 1, 20X3, for $28,000 above Stick’s reported net assets. At that date, Stick
On June 10, 20X8, Playoff Corporation acquired 100 percent of Series Company’s common stock. Summarized balance sheet data for the two companies immediately after the stock acquisition are as
Plaza Corporation acquired 100 percent of Square Corporation’s voting common stock on December 31, 20X4, for $395,000. At the date of combination, Square reported the following:At December 31,
Plumber Corporation acquired all of Socket Corporation’s voting shares on January 1, 20X2, for $470,000. At that time, Socket reported common stock outstanding of $80,000 and retained earnings of
Player Corporation purchased 100 percent of Scout Company’s common stock on January 1, 20X5, and paid $28,000 above book value. The full amount of the additional payment was attributed to
Single Corporation’s balance sheet at January 1, 20X7, reflected the following balances:Plural Corporation, which had just entered into an active acquisition program, acquired 100 percent of
Pop Company acquired all of Soda Corporation’s common shares on January 2, 20X3, for $789,000. At the date of combination, Soda’s balance sheet appeared as follows:The fair values of all of
On December 31, 20X8, Paragraph Corporation acquired 80 percent of Sentence Company’s common stock for $136,000. At the acquisition date, the book values and fair values of all of Sentence’s
Pocket Corporation acquired 100 percent of Strap Corporation’s common stock on December 31, 20X2. Balance sheet data for the two companies immediately following the acquisition follow:At the date
Sheet Company reported the following net income and dividends for the years indicated:Pillow Corporation acquired 75 percent of Sheet’s common stock on January 1, 20X5. On that date, the fair value
Softball Corporation reported the following balances at January 1, 20X9:On January 1, 20X9, Pitcher Corporation purchased 100 percent of Softball’s stock. All tangible assets had a remaining
Pirate Corporation purchased 100 percent ownership of Ship Company on January 1, 20X5, for $270,000. On that date, the book value of Ship’s reported net assets was $200,000. The excess over book
Phone Corporation owns 75 percent of Smart Company’s common stock, acquired at underlying book value on January 1, 20X4. At the acquisition date, the book values and fair values of Smart’s assets
Plastic Company purchased 100 percent of Spoon Company’s voting common stock for $648,000 on January 1, 20X4. At that date, Spoon reported assets of $690,000 and liabilities of $230,000. The book
Pitch Corporation purchased 100 percent ownership of Southpaw Corporation on January 1, 20X4, for $65,000, which was $10,000 above the underlying book value. Half the additional amount was
Planet Corporation acquired 100 percent of the voting common stock of Saturn Company on January 1, 20X7, by issuing bonds with a par value and fair value of $670,000 and making a cash payment of
Planner Corporation purchased 100 percent of Schedule Company’s stock on January 1, 20X4, for $340,000. On that date, Schedule reported net assets with a historical cost of $300,000 and a fair
Photo Corporation acquired 75 percent of Shutter Corporation’s voting common stock on January 1, 20X2, at underlying book value. At the acquisition date, the book values and fair values of
Pizza Corporation purchased 100 percent of the common stock of Slice Corporation on January 1, 20X2, by issuing 45,000 shares of its $6 par value common stock. The market price of Pizza’s shares at
Potter Corporation and its subsidiary reported consolidated net income of $164,300 for 20X2. Potter owns 60 percent of the common shares of its subsidiary, acquired at book value. Noncontrolling
Stick Company reports net assets with a book value and fair value of $200,000. Paste Corporation acquires 75 percent ownership for $150,000. Paste reports net assets with a book value of $520,000 and
On January 2, 20X8, Primary Corporation acquired 100 percent of Secondary Company’s outstanding common stock. In exchange for Secondary’s stock, Primary issued bonds payable with a par and fair
Prime Corporation acquired 100 percent ownership of Steak Products Company on January 1, 20X1, for $200,000. On that date, Steak reported retained earnings of $50,000 and had $100,000 of common stock
Power Corporation acquired 100 percent ownership of Scrub Company on February 12, 20X9. At the date of acquisition, Scrub Company reported assets and liabilities with book values of $420,000 and
Post Records Inc. acquired all of Script Studios’ voting shares on January 1, 20X2, for $280,000. Post’s balance sheet immediately after the combination contained the following balances:Script
Powder Company spent $240,000 to acquire all of Sawmill Corporation’s stock on January 1, 20X2. The balance sheets of the two companies on December 31, 20X3, showed the following amounts:Sawmill
Statue Corporation’s balance sheet at January 1, 20X7, reflected the following balances:Prize Corporation entered into an active acquisition program and acquired 80 percent of Statue’s common
Prophet Corporation acquired 75 percent of Seer Corporation’s voting common stock on December 31, 20X4, for $390,000. At the date of combination, Seer reported the following:At December 31, 20X4,
On June 10, 20X8, Private Corporation acquired 60 percent of Secret Company’s common stock. The fair value of the noncontrolling interest was $32,800 on that date. Summarized balance sheet data for
How is the amount assigned to the noncontrolling interest normally determined when a consolidated balance sheet is prepared immediately after a business combination?
Purchase Corporation purchased 60 percent of Steal Company ownership on January 1, 20X7, for $277,500. Steal reported the following net income and dividend payments:On January 1, 20X7, Steal had
Proud Corporation acquired 80 percent of Spirited Company’s voting stock on January 1, 20X3, at underlying book value. The fair value of the noncontrolling interest was equal to 20 percent of the
This exercise is a continuation of E5–13. Proud Corporation acquired 80 percent of Spirited Company’s voting stock on January 1, 20X3, at underlying book value. The fair value of the
Punk Corporation purchased 80 percent of Soul Corporation’s stock on January 1, 20X2. At that date, Soul reported retained earnings of $80,000 and had $120,000 of stock outstanding. The fair value
Purple Corporation acquired 75 percent of Socks Corporation’s common stock on January 1, 20X8, for $435,000. At that date, Socks reported common stock outstanding of $300,000 and retained earnings
Purse Corporation acquired 70 percent of Scarf Corporation’s ownership on January 1, 20X8, for $140,000. At that date, Scarf reported capital stock outstanding of $120,000 and retained earnings of
Server Corporation is a majority-owned subsidiary of Proxy Corporation. Proxy acquired 75 percent ownership on January 1, 20X3, for $133,500. At that date, Server reported common stock outstanding of
On December 31, 20X4, Puzzle Corporation acquired 90 percent of Sunday Inc.’s common stock for $864,000. At that date, the fair value of the noncontrolling interest was $96,000. Of the $240,000
Putt Corporation acquired 80 percent of Slice Company’s voting common stock on January 1, 20X4, for $138,000. At that date, the fair value of the noncontrolling interest was $34,500. Slice’s
Paint Corporation acquired 80 percent of the stock of Stain Company by issuing shares of its common stock with a fair value of $192,000. At that time, the fair value of the noncontrolling interest
Pizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $160,000. On that date, the fair value of the noncontrolling interest was $40,000, and Slice reported
Pillow Corporation acquired 80 percent ownership of Sheet Company on January 1, 20X7, for $173,000. At that date, the fair value of the noncontrolling interest was $43,250. The trial balances for the
Pillow Corporation acquired 80 percent ownership of Sheet Company on January 1, 20X7, for $173,000. At that date, the fair value of the noncontrolling interest was $43,250. The trial balances for the
On January 2, 20X8, Photo Corporation acquired 75 percent of Shutter Company’s outstanding common stock. In exchange for Shutter’s stock, Photo issued bonds payable with a par value of $500,000
Phone Corporation acquired 70 percent of Smart Corporation’s common stock on December 31, 20X4, for $102,200. At that date, the fair value of the noncontrolling interest was $43,800. Data from the
Paste Corporation acquired 70 percent of Stick Company’s stock on January 1, 20X9, for $105,000. At that date, the fair value of the noncontrolling interest was equal to 30 percent of the book

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