Concept explainers
a
Introduction: The consolidation procedure used in the second year and the subsequent year is similar to that of the first. The equity method is used to evaluate the investment in the subsidiary. In order to determine consolidation entries, the change in the parent’s investment in the second or subsequent year is determined. Any differential arising is recognized and all the intercompany transactions are eliminated.
The equity method entries that P would record for its investment in S during 20X8.
b
Introduction: The consolidation procedure used in the second year and the subsequent year is similar to that of the first. The equity method is used to evaluate the investment in the subsidiary. In order to determine consolidation entries, the change in the parent’s investment in the second or subsequent year is determined. Any differential arising is recognized and all the intercompany transactions are eliminated.
The Consolidation entries needed for December 31, 20X8
Want to see the full answer?
Check out a sample textbook solutionChapter 5 Solutions
Advanced Financial Accounting
- Papa Ltd. acquires 80% shares of Child Ltd. for $90,000 with control. The fair value of Child's net assets is $100,000 on the acquisition date. Prepare a consolidated statement for Papa Ltd. on the date acquisition give the separate statements for each entity below Papa Ltd. Child Ltd. Assets: Cash $100,000 15,000 100,000 $1,000 5,000 30,000 4,000 Accounts Receivable Inventory Other assets 5,000 Property Plant and Equipment 70,000 40,000 Total Assets $290,000 $80,000 Liabilities: Accounts Payable Accrued Expenses Other Liability Long term debt Equity: Common Stock 10,000 5,000 20,000 50,000 3,000 2,000 5,000 10,000 120,000 40,000 Retained Earnings Total Liability & Equity 85,000 20,000 $290,000 $80,000arrow_forwardThe P Ltd acquires all issued capital of the S Ltd for a consideration of $1,000,000 cash and 800,000 shares each valued at $1.50. The summary statement of the financial position of the subsidiary company immediately following the acquisition is: Fair value of assets acquired $2,640,000 Fair value of liabilities acquired $720,000 Total shareholders’ equity of the subsidiary company $800,000 Retained earnings of the subsidiary company $1,120,000 Required: Pass the necessary journal entry to record the acquisition (2 marks) Determine the amount of goodwill…arrow_forwardThe P Ltd acquires all issued capital of the S Ltd for a consideration of $1,000,000 cash and 800,000 shares each valued at $1.50. The summary statement of the financial position of the subsidiary company immediately following the acquisition is: Fair value of assets acquired $2,640,000 Fair value of liabilities acquired $720,000 Total shareholders’ equity of the subsidiary company $800,000 Retained earnings of the subsidiary company $1,120,000 Required: a) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition b) Pass the necessary consolidation entry to eliminate the subsidiary by the parent company c) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition if the purchase consideration paid was $1,000,000 cash and 400,000 shares each valued at $1.50arrow_forward
- Power Corporation acquired 70 percent of Silk Corporation’s common stock on December 31, 20x2. Balance sheet datafor the two companies immediately following acquisition follow: 1. What amount of inventory will be reported?A. P 179,000 C. P 210,500B. P 200,000 D. P 215,0002. What amount of goodwill will be reportedA. P 0 C. P 40,000B. P 28,000 D. P 52,0003. What amount of total assets will be reported?A. P 1,081,000 C. P 1,196,500B. P 1,121,000 D. P 1,231,50arrow_forwardThe P Ltd acquires all issued capital of the S Ltd for a consideration of $1,000,000 cash and 800,000 shares eachvalued at $1.50. The summary statement of the financial position of the subsidiary company immediatelyfollowing the acquisition is:Fair value of assets acquired $2,640,000Fair value of liabilities acquired $720,000Total shareholders’ equity of the subsidiary company $800,000Retained earnings of the subsidiary company $1,120,000Required:(b) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition (c) Pass the necessary consolidation entry to eliminate the subsidiary by the parent company (d) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition if the purchase consideration paid was $1,000,000 cash and 400,000 shares each valued at $1.50.arrow_forwardThe P Ltd acquires all issued capital of the S Ltd for a consideration of $1,000,000 cash and 800,000 shares eachvalued at $1.50. The summary statement of the financial position of the subsidiary company immediatelyfollowing the acquisition is:Fair value of assets acquired $2,640,000Fair value of liabilities acquired $720,000Total shareholders’ equity of the subsidiary company $800,000Retained earnings of the subsidiary company $1,120,000Required:(d) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition if the purchaseconsideration paid was $1,000,000 cash and 400,000 shares each valued at $1.50arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education