Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 1, Problem 1.2.5E
Multiple-Choice Questions on Recording Business Combinations [AICPA Adapted]
Select the correct answer for each of the following questions.
5. A and B Companies have been operating separately for five years. Each Company has a minimal amount of liabilities and a simple capital structure consisting solely of voting common stock.In exchange for 40 percent of its voting stock, A Company acquires 80 percent of the commonstock of B Company. This is a “tax-free” stock-for-stock exchange for tax purposes B Company’sidentifiable assets have a total net fair mar1et value of $800,000 and a total net book value of$580,000. The fair market value of the A stock used in the exchange is $700,000, and the fairvalue of the noncontrolling interest is $175,000. The
a. Zero.
b. $60,000.
c. $75,000.
cl. $295,000.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Required information
[The following information applies to the questions displayed below.)
Lone Star Company is a calendar-year corporation, and this year Lone Star reported $115,000 in current E&P that
accrued evenly throughout the year. At the beginning of the year, Lone Star's accumulated E&P was $13,800. At the
beginning of the year, Lone Star's sole shareholder was Matt McCon. Lone Star declared $34,500 in cash
distributions on each of the following dates: March 31, June 30, September 30, and December 31. (Leave no answer
blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.)
b. Suppose that Matt sold half of his shares to Chris Coop on June 1st for $47,500. How much dividend income will Matt recognize this
year?
Dividend recognized
Required information
[The following information applies to the questions displayed below.]
JDog Corporation owns stock in Oscar Incorporated valued at $2,000,000 at the beginning of the year and $2,200,000 at
year-end. JDog received a $10,000 dividend from Oscar Incorporated. What temporary book-tax differences associated
with its ownership in Oscar stock will JDog report for the year in the following alternative scenarios (income difference
only-ignore the dividends-received deduction)? (Leave no answer blank. Enter zero if applicable.)
b. JDog owns 40 percent of the Oscar Incorporated
Book-tax difference
ck. Oscar's income for the year was $500,000.
Required information
[The following information applies to the questions displayed below.]
On January 2, 2024, Sanborn Tobacco Incorporated bought 5% of Jackson Industry's capital stock for $92 million. Jackson
Industry's net income for the year ended December 31, 2024, was $122 million. The fair value of the shares held by
Sanborn was $102 million at December 31, 2024. During 2024, Jackson declared a dividend of $62 million.
2. Assume that Sanborn sold the stock on January 2, 2025 for $114 million. Prepare the journal entries Sanborn would use to record
the sale.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers
in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).
View transaction list
Journal entry worksheet
Chapter 1 Solutions
Advanced Financial Accounting
Ch. 1 - What types of circumstances would encourage...Ch. 1 - How would the decision to dispose of a segment of...Ch. 1 - Prob. 1.3QCh. 1 - Prob. 1.4QCh. 1 - Prob. 1.5QCh. 1 - Prob. 1.6QCh. 1 - Prob. 1.7QCh. 1 - Prob. 1.8QCh. 1 - Prob. 1.9QCh. 1 - Prob. 1.10Q
Ch. 1 - Prob. 1.11QCh. 1 - Prob. 1.12QCh. 1 - Prob. 1.13QCh. 1 - Prob. 1.14QCh. 1 - Within the measurement period following a business...Ch. 1 - Prob. 1.16QCh. 1 - Prob. 1.1CCh. 1 - Prob. 1.2CCh. 1 - Prob. 1.3CCh. 1 - Prob. 1.4CCh. 1 - Risks Associated with Acquisitions Not all...Ch. 1 - Prob. 1.6CCh. 1 - Prob. 1.1.1ECh. 1 - Prob. 1.1.2ECh. 1 - Prob. 1.1.3ECh. 1 - Multiple-Choice Questions on Complex Organizations...Ch. 1 - Prob. 1.1.5ECh. 1 - Prob. 1.2.1ECh. 1 - Prob. 1.2.2ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Prob. 1.2.4ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Prob. 1.3.3ECh. 1 - Prob. 1.3.4ECh. 1 - Prob. 1.4.1ECh. 1 - Prob. 1.4.2ECh. 1 - Prob. 1.4.3ECh. 1 - Multiple-Choice Questions Involving Account...Ch. 1 - Prob. 1.4.5ECh. 1 - Prob. 1.5ECh. 1 - Prob. 1.6ECh. 1 - Prob. 1.7ECh. 1 - Prob. 1.8ECh. 1 - Prob. 1.9ECh. 1 - Prob. 1.10ECh. 1 - Balances Reported Following Combination Palm...Ch. 1 - Goodwill Recognition Spur Corporation reported the...Ch. 1 - Acquisition Using Debentures Planter Corporation...Ch. 1 - Bargain Purchase Using the data resented in E1-13,...Ch. 1 - Prob. 1.15ECh. 1 - Prob. 1.16ECh. 1 - Prob. 1.17ECh. 1 - Prob. 1.18ECh. 1 - Prob. 1.19ECh. 1 - Prob. 1.20ECh. 1 - Prob. 1.21ECh. 1 - Prob. 1.22ECh. 1 - Prob. 1.23ECh. 1 - Prob. 1.24PCh. 1 - Prob. 1.25PCh. 1 - Prob. 1.26PCh. 1 - Acquisition in Multiple Steps Peal Corporation...Ch. 1 - Prob. 1.28PCh. 1 - Prob. 1.29PCh. 1 - Prob. 1.30PCh. 1 - Prob. 1.31PCh. 1 - Computation of Account Balances Saspro Division is...Ch. 1 - Prob. 1.33PCh. 1 - Prob. 1.34PCh. 1 - Prob. 1.35PCh. 1 - Business Combination Following are the balance...Ch. 1 - Prob. 1.37PCh. 1 - Prob. 1.38PCh. 1 - Prob. 1.39PCh. 1 - Prob. 1.40P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Choose the correct. Arcola, Inc., acquires all 40,000 shares of Tuscola Company for $725,000. A year later, when Arcola’s equity adjusted balance in its investment in Tuscola equals $800,000, Tuscola issues an additional 10,000 shares to outside investors for $25 per share. Which of the following best describes the effect of Tuscola’s stock issue on Arcola’s investment account?a. No effect because the shares were all sold to outside parties.b. The investment account is reduced because Arcola now owns a smaller percentage of Tuscola.c. The investment account is increased because Arcola’s share of Tuscola’s value has increased.d. No effect because Arcola maintains control over Tuscola despite the new stock issue.arrow_forwardUse the PFRS for SMEs) On 31 December 20X1 entity A acquired 30 per cent of the ordinary shares that carry voting rights of entity B for ₱100,000. Entity A incurred transaction costs of ₱1,000 in acquiring these shares. Entity A has significant influence over entity B. Entity A uses the cost model to account for its investments in associates. In January 20X2 entity B declared and paid a dividend of ₱20,000 out of profits earned in 20X1. No further dividends were paid in 20X2, 20X3 or 20X4. A published price quotation does not exist for entity B. At 31 December 20X1, 20X2 and 20X3, in accordance with Section 27 Impairment of Assets, management assessed the fair values of its investment in entity B as ₱102,000, ₱110,000 and ₱90,000 respectively. Costs to sell are estimated at ₱4,000 throughout. Entity A measures its investment in entity B on 31 December 20X1, 20X2 and 20X3 respectively at: a. ₱100,000, ₱100,000, ₱100,000. b. ₱95,000, ₱95,000, ₱86,000. c. ₱98,000,…arrow_forwardPrepare general journal entries for the following transactions, identifying each transaction by letter: (a) Gnu Company issued 5,000 shares of 1 par common stock to the Prendergas law firm as partial payment of fees incurred to incorporate the business. Gnu was short of cash, so Prendergas agreed to accept 10,000 cash and the shares of common stock in full settlement of its bill for 55,000. (b) Gnu issued 50,000 shares of 1 par common stock in exchange for a parcel of land for building a shopping plaza. (The list price for the land was 400,000; a similar parcel in the same area sold last week for 380,000. During the past month, the price at which Gnus common stock has traded on the open market has ranged from 5 to 12 per share. Two trades occurred yesterday at 7 and 10 per share.) (c) Gnu purchased 10,000 shares of 1 par value common treasury stock for 70,000. (This is the only treasury stock that Gnu holds.) (d) Gnu sold 4,000 shares of common treasury stock for 32,000. (e) Gnu sold 5,000 shares of common treasury stock for 30,000.arrow_forward
- Problem 3. Atty. Richard Opinion has done a lot in the forming of Farmingstone, Inc. The Articles of incorporation showed that the corporation has an authorized ordinary share capital of P10,000,000 with an equivalent share of 50,000. Farmingstone is to issue 250 shares at par value for the services of the lawyer. Record the following transactions assuming: 1) The services of Atty. Opinion is valued at P60,000. 2) No known value of the services instead the fair value of ordinary share is determined to be P250. 3) There is no known value for both services rendered and the ordinary share capital Issued.arrow_forwardProblem 1-26 (Algo) (LO 1-2, 1-4, 1-5) On December 31, 2022, Akron, Incorporated, purchased 5 percent of Zip Company's common shares on the open market in exchange for $15,650. On December 31, 2023, Akron, Incorporated, acquires an additional 25 percent of Zip Company's outstanding common stock for $96,000. During the next two years, the following information is available for Zip Company: Year 2022 2023 2024 Income $ 76,000 97,000 Dividends Declared $ 6,100 16,000 a1. Equity income a2. Investment in Zip account b1. Reported income b2. Investment in Zip account Common Stock Fair Value (12/31) $313,000 384,000 477,000 At December 31, 2023, Zip reports a net book value of $299,000. Akron attributed any excess of its 30 percent share of Zip's fair ove book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of 10 years at December 31, 2023. Required: a. Assume Akron applies the equity method to its Investment in Zip account: 1. What amount of…arrow_forward1. On January 2, 2022, Bread Corporation issued 100,000 new shares of its $5 par value common stock valued at $19 a share for all of Dilan Corporation's outstanding common shares. Bread paid $15,000 to register and issue shares. Bread also paid $10,000 for the direct combination costs of the accountants. The fair value and book value of Dilan's identifiable assets and liabilities were the same. Summarized balance sheet information for both companies just before the acquisition on January 2, 2022, is as follows: Cash Inventories Other current assets Land Plant assets-net Total Assets Accounts payable Bread Dilan $ 150,000 320,000 $ 120,000 400,000 500,000 500,000 350,000 250,000 4,000,000 1,500,000 $5,320,000 $2,770,000 $1,000,000 $ 300,000 Notes payable 1,300,000 660,000 Capital stock, $5 par 2,000,000 500,000 Paid-in capital 1,000,000 100,000 Retained Earnings 20,000 1,210,000 Total Liabilities & Equities $5,320,000 $2,770,000 Required: 1. Prepare Bread's general journal entry for the…arrow_forward
- Use the following facts for Multiple Choice problems 28 and 29: Assume on January 1, 2022, the investor company issued 10,000 new shares of the investor company's com- mon stock in exchange for all of the individually identifiable assets and liabilities of the investee company. The investee company qualifies as a business. Fair value approximates book value for all of the investee's identifiable net assets. The transaction resulted in no goodwill or bargain purchase gain. The following financial statement information is for an investor company and an investee company on January 1, 2022, prepared immediately before this transaction. Receivables & inventories Land. Property & equipment... Total assets.... Liabilities... Common stock ($1 par) Additional paid-in capital. Retained earnings. Total liabilities & equity. Net Assets **** 28. Asset acquisition (fair value equals book value) What is the per share fair value of the investor's common stock? . c. $42.00/share d. $58.80/share a.…arrow_forwardProble.n 16-15 (PHILCPA Adapted) Heste Company invested in shares of another entity. Number of shares Cost 2018 2019 20,000 40,000 2,000,000 3,500,000 In 2020, the entity received 60,000 rights to purchase one share at P80. Five rights are required to purchase the share. At issue date, rights had a market value of P5 each. The entity used rights to purchase 10,000 additional shares of the investee and allowed the rights not exercised to lapse. What amount was debited to investment account for the purchase of the additional new shares? 1,100,000 b. 1,050,000 a.: 800,000 900,000 C, d.arrow_forward1.Firm A is planning on merging with the Firm B. Firm A will pay Firm B’s stockholders the current value the of their stock plus one-half on the synergy, which is $120, in shares of firm A. Firm A currently has 4000 shares of stock outstanding at a market price of $21 a share. Firm B has shares outstanding at a price of $10 a share. What is the value of the merged firms? A.$96240 B.$88120 C.$96000 D.$84120 E.$92360 2.Which of the following not true regarding financial statement A.Group financial statement be produced by each subsidiary as well as the parent entity B.Profit must be separated between members of the parent company and that of minority interest C.Minority interest share of equity represents that ‘part of a subsidiary’s equity not allocated to members of the parent company. D.Group financial statements must be produced by the parent entity only. E.None of the options provided.arrow_forward
- (Use the PFRS for SMEs) On December 31, 2021, Taher Co. acquired 30% of the ordinary shares that carry voting rights of entity B for P100,000. Taher Co. incurred transaction costs of P1,000 in acquiring these shares. Taher Co. has significant influence over entity B. Taher Co. uses the cost model to account for its investments in associates. In January 2022, entity B declared and paid a dividend of P20,000 out of profits earned in 2021. No further dividends were paid in 2022, 2023 or 2024. A published price quotation does not exist for entity B. At December 31, 2021, 2022 and 2023, in accordance with Section 27 Impairment of Assets, management assessed the fair values of its investment in entity B as P102,000, P110,000 and P90,000 respectively. Costs to sell are estimated at P4,000 throughout. Taher Co. measures its investment in entity B on December 31, 2021 at? Taher Co. measures its investment in entity B on December 31, 2022 at? The facts are the same as in the immediately…arrow_forwardEntity A has 200,000 ordinary shares outstanding on January 1, 20x1. Entity A offers rights issue to its existing shareholders that enable them to acquire 1 ordinary share at a subscription price of P120 for every 5 rights held. The rights are exercised on May 1, 20x1. The market price of one ordinary share immediately before exercise is P180. Entity A reported profit after tax of P2,700,000 in 20x1. What is the basic earnings per share in 20x1? * O 12.58 O 12.67 O 11.71 O 11.67arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Stock Market Index Definition (BEGINNER FRIENDLY EXPLANATION!); Author: It's Your Girl Rose;https://www.youtube.com/watch?v=LxI12aUaabc;License: Standard Youtube License