Income statement: Sales. Cost of goods sold. Gross profit. Equity income. Operating expenses. Net income. Assume...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Income statement: Sales. Cost of goods sold. Gross profit. Equity income. Operating expenses. Net income. Assume the parent company acquires its subsidiary on January 1, 2019, by exchanging 59,000 shares of its $1 par value Common Stock, with a market value on the acquisition date of $30 per share, for all of the outstanding voting shares of the acquiree. You have been charged with preparing the consolidation of these two companies at the end the first year. On the acquisition date, all of the subsidiary's individual net assets had fair values that equaled their book values except for the following: PPE assets are undervalued by $120,000 (depreciation = $10,000 per year), and the subsidiary has an unrecorded Patent that has a fair value of $320,000 (amor- tization = $40,000 per year). Any remaining difference between the purchase price and the fair value of the identifiable assets results from expected synergies that are expected to be realized as a result of the business combination. Following are financial statements of the parent and its subsidiary for the year ended December 31, 2019: a. b. Parent C. Subsidiary 150,000 (1,000,000) 850,000 $5,500,000 $1,600,000 (3,800,000) (950,000) 1,700,000 650,000 Accounts receivable. Statement of retained earnings: Beginning retained earnings... $2,800,000 $800,000 Net income 850,000 200,000 Dividends (160,000) (60,000) Ending retained earnings. $3,490,000 $940,000 (450,000) $ 200,000 Balance sheet: Assets Cash Inventory Equity investment. Property, plant and equipment (PPE), net ... Liabilities and stockholders' equity Accounts payable. Accrued liabilities Long-term liabilities. Common stock APIC. Retained earnings Parent $ 300,000 700,000 940,000 1,860,000 3,400,000 $7,200,000 $ 220,000 340,000 450,000 600,000 2,100,000 3,490,000 $7,200,000 Subsidiary $ 120,000 360,000 600,000 d. Prepare the consolidation entries for the year ended December 31, 2019. e. Prepare the consolidated spreadsheet for the year ended December 31, 2019. f. 920,000 $2,000,000 $ 100,000 180,000 430,000 150,000 200,000 940,000 $2,000,000 Prepare the journal entry to record the acquisition of the subsidiary. Show the computations to yield the equity income of $150,000 reported by the parent in its income statement. Show the computations to yield the Equity Investment reported by the parent in the amount of $1,860,000. What additional assets have been recognized on the consolidated balance sheet that were not explicitly reported on the balance sheets of either the parent or the subsidiary? Why were they not previously reported in pre-acquisition financial statements of the parent or the subsidiary? Income statement: Sales. Cost of goods sold. Gross profit. Equity income. Operating expenses. Net income. Assume the parent company acquires its subsidiary on January 1, 2019, by exchanging 59,000 shares of its $1 par value Common Stock, with a market value on the acquisition date of $30 per share, for all of the outstanding voting shares of the acquiree. You have been charged with preparing the consolidation of these two companies at the end the first year. On the acquisition date, all of the subsidiary's individual net assets had fair values that equaled their book values except for the following: PPE assets are undervalued by $120,000 (depreciation = $10,000 per year), and the subsidiary has an unrecorded Patent that has a fair value of $320,000 (amor- tization = $40,000 per year). Any remaining difference between the purchase price and the fair value of the identifiable assets results from expected synergies that are expected to be realized as a result of the business combination. Following are financial statements of the parent and its subsidiary for the year ended December 31, 2019: a. b. Parent C. Subsidiary 150,000 (1,000,000) 850,000 $5,500,000 $1,600,000 (3,800,000) (950,000) 1,700,000 650,000 Accounts receivable. Statement of retained earnings: Beginning retained earnings... $2,800,000 $800,000 Net income 850,000 200,000 Dividends (160,000) (60,000) Ending retained earnings. $3,490,000 $940,000 (450,000) $ 200,000 Balance sheet: Assets Cash Inventory Equity investment. Property, plant and equipment (PPE), net ... Liabilities and stockholders' equity Accounts payable. Accrued liabilities Long-term liabilities. Common stock APIC. Retained earnings Parent $ 300,000 700,000 940,000 1,860,000 3,400,000 $7,200,000 $ 220,000 340,000 450,000 600,000 2,100,000 3,490,000 $7,200,000 Subsidiary $ 120,000 360,000 600,000 d. Prepare the consolidation entries for the year ended December 31, 2019. e. Prepare the consolidated spreadsheet for the year ended December 31, 2019. f. 920,000 $2,000,000 $ 100,000 180,000 430,000 150,000 200,000 940,000 $2,000,000 Prepare the journal entry to record the acquisition of the subsidiary. Show the computations to yield the equity income of $150,000 reported by the parent in its income statement. Show the computations to yield the Equity Investment reported by the parent in the amount of $1,860,000. What additional assets have been recognized on the consolidated balance sheet that were not explicitly reported on the balance sheets of either the parent or the subsidiary? Why were they not previously reported in pre-acquisition financial statements of the parent or the subsidiary?
Expert Answer:
Answer rating: 100% (QA)
Consolidated Account Statement CAS is a singlecombined account statement which shows the details of ... View the full answer
Related Book For
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Posted Date:
Students also viewed these finance 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...
-
Crain Company issued 2,000 shares of its $5 par value common stock in payment of its attorney's bill of $30,000. The bill was for services performed in helping the company incorporate. Crain should...
-
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...
-
What is a safe edge on a file?
-
A satellite can orbit at 5 km above the Moon, but not at 5 km above Earth. Why?
-
Four equal-value resistors are connected in parallel. Five volts are applied across the parallel circuit, and 2.5 mA are measured from the source. What is the value of each resistor?
-
Water at \(20{ }^{\circ} \mathrm{C}\) flows through a concentric annulus of inner diameter \(D_{1}=2.0 \mathrm{~cm}\) and outer diameter \(D_{2}=4.0 \mathrm{~cm}\). The surface roughness is \(0.002...
-
Use Worksheet 11.1 Linda Scales is a young career woman whos now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the people she works...
-
Write a C program that uses the random number generator rand( ) to create an array with 20 numbers in the range from 1 to 50 and disply them in a row. The program sorts the array elements and...
-
At June 30, 2022, the end of its most recent fiscal year, Green River Computer Consultants post-closing trial balance was as follows: The company underwent a major expansion in July. New staff was...
-
The Total Quality Approach to Quality Management provides a foundation that helps ensure that products are developed with the appropriate level of quality and customers are highly satisfied. Respond...
-
Assume that the organisation to not subsribe to any standartds, framework and best practice, how this impact the IS audit conclusion and what impact it will have in the financial sector as financial...
-
write a thesis for my Family Law class the topic is Divorce and the paper has to be 10 pages ?
-
How can data analytics, sentiment analysis, and social network analysis be utilized to measure the effectiveness of communication strategies, track audience engagement, and inform iterative...
-
How can psychological resilience interventions, such as mindfulness-based stress reduction programs, cognitive-behavioral therapy techniques, and resilience training workshops, empower individuals to...
-
How can resilience metrics, resilience indices, and performance indicators be developed and utilized to assess and benchmark resilience capabilities at the organizational, community, and societal...
-
Make an e-mail for the following situations 1) confirming your work schedule with your manager 2) determining which interview time you signed up for 3) informing your manager that you will be unable...
-
Is it a breach of fiduciary duty for a director of a real estate investment trust (REIT) negotiating a joint venture on behalf of the REIT with another director for the development of a portfolio of...
-
The financial statements of Adidas (DEU) and Puma (DEU) are presented in Appendices B and C, respectively. The complete annual reports, including the notes to the financial statements, are available...
-
Shaw Ltd. sells goods that cost 300,000 to Ricard Company for 410,000 on January 2, 2019. The sales price includes an installation fee, which has a standalone selling price of 40,000. The standalone...
-
Indicate three reasons why a company might sell its receivables to another company.
-
Maribel Ortiz is puzzled. Her company had a profit margin of 10% in 2025. She feels that this is an indication that the company is doing well. Gordon Liddy, her accountant, says that more information...
-
At December 31, 2025, the fair value of non-trading securities is 41,300 and the cost is 39,800. At January 1, 2025, there was a credit balance of 900 in the Fair Value Adjustment Non-Trading...
-
On January 1, 2025, Lennon Enterprises acquires 100% of Ono Ltd. for 220,000 in cash. The condensed statements of financial position of the two companies immediately following the acquisition are as...
Study smarter with the SolutionInn App