Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Question
Chapter 1, Problem 1.2C
1
To determine
Acquisition
It is a process under which one company buysmajority of shares of another company and gains the control of the other company.
One reason for which company A purchased majority of shares of company T and the benefit of this acquisition to company A.
2
To determine
Purchase consideration
Purchase consideration represents the amount that purchasing company pays to the acquired company in exchange of the assets and liabilities.
The amount of consideration in the acquisition of company T by company A.
3
To determine
Purchase consideration
Purchase consideration represents the amount that purchasing company pays to the acquired company in exchange of the assets and liabilities.
How purchase consideration was satisfied in the given acquisition case.
4
To determine
Acquisition
It is a process under which one company buysmajority of shares of another company and gains the control of the other company.
The type of acquisition that would describe the given case of acquisition.
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Instructions
During January 2020, Long Corporation for the first time decided to acquire some equity securities as a means of putting some of its idle cash to work. The securities are classified as trading securities. At March 31, when Long prepares its first quarter
financial statements, the following information about the acquired securities is available:
Securities
Cost
Market
1
$52,000 550,000
2
32,000 29,000
3
35,000 27.000
Required:
a. Prepare the journal entries to record the acquisition in January and valuation at the end of the first quarter of 2020.
b. Assume that on June 30, 2020, the company still has this same portfolio The market value of 1 is S57.000 2 is S30 000 and 3 s 531.000
What journal entry if any should be prepared at the end of the second quarter?
c. On August 15, 2020, Long Corporation sold Security 3 for $33.000 Prepare the joumal entry to record this transaction.
P1-2 Prepare balance sheet after an acquisition
On January 2, 2016, Pop Corporation enters into a business combination with Son Corporation in
which Son is dissolved. Pop pays $1,650,000 for Son, the consideration consisting of 66,000
shares of Pop $10 par common stock with a market value of $25 per share. In addition, Pop pays the
following expenses in cash at the time of the merger:
Finder's fee
Accounting and legal fees
Registration and issuance costs of securities
Balance sheet and fair value information for the two companies on December 31, 2015, immediately before
the merger, is as follows (in thousands):
Cash
Accounts receivable-net
Inventories
Land
Buildings-net
Equipment-net
Total assets
Accounts payable
Note payable
Capital stock, $10 par
Other paid-in capital
Retained earnings
Total liabilities and owners' equity
Pop Book Value
$300
460
1,040
800
2,000
1,000
$5,600
$ 600
1,200
1,600
1,200
1,000
$5,600
$70,000
130,000
80,000
$280,000
Son Book Value Son Fair Value
$ 60
$60
100…
Week 1You are the audit manager of Overseas Explorer Ltd (OEL), which acquired the small proprietarycompany Local Pty Ltd (Local) on 30 June 2018. The price of the acquisition was agreed at $5 million,on the condition that OEL is satisfied with the financial records of Local. As Local is a small proprietarycompany, it has not prepared statutory financial reports or undergone an audit since its incorporationin 2016. However, Local has agreed to allow your firm, which is the auditor of OEL, to access its booksand records. The CEO of OEL, Wendy Champion, has requested that your firm provide assurance onthe following three items: The management accounts for the year ended 30 June 2017 All transactions occurring from the date negotiations commenced until the settlement date, toensure that all transactions were within the normal course of operations The financial report prepared at the acquisition date of 30 June 2018In order to clarify your responsibilities, you requested that OEL…
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
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