December 30 2021, OREO INC. acquired 70% of TIFANNY's outstanding common shares, paying $140,000 in cash.

As of the indicated date, the "Stockholders' Equity" section included:

               "Capital (Common) Stocks"          $20,000

               "Retained Earnings"                     $80,000

The fair value of TIFFANY's net assets is equal to the book value. Any difference will be prorated to $10,000 Patent (Intangible) and any additional excess to Goodwill. The patent will be amortized considering 5 years. The Goodwill will not be amortized for the moment.

The financial statements of both companies are presented at the end of the accounting period. Assume December 31, 2022

The complete worksheet is presented with the financial statements as of December 31, 2022 of both companies and their amounts. Also, the spaces for deletions and adjustments, and the consolidation column.

Remember that:

If you buy less than 100% interest in ABC, you must:

               1.Calculate the implicit value of the transaction.

               2. Determine the Noncontrolling Interest at the beginning of the transaction and at the end of the year of operations.

               It is necessary to eliminate the capital of the subsidiary.

               Identify eliminations with letters.

 

Questions. You can answer them at the end. They can add pages.

 

1. Define and give an example of what is known as "Push Down Accounting".

2. State some advantages and limitations of the consolidation of financial statements.

3. Explain what "Noncontrolling Interest" is.

4. Describe the terms Parent & Subsidiary Companies".

5. Write one and answer it yourself that I don't know the name and related issues.

 

Required:

1. Complete the worksheet in all its parts. Identify removals and adjustments with corresponding letters.

2. Make entries for adjustments or deletions in Journal.

3. Properly structure and present the three statements individually with the amounts shown on the worksheet.

Answer rating: 100% (QA)

Answer 1 Push Down Accounting is an accounting method used when a parent company acquires a majority stake in a subsidiary When a parent company acquires a majority stake in a subsidiary the subsidiar... View the full answer