Question

In: Accounting

Reporting of Equity in Consolidation Paris Cosmetics purchased all of the of the ordinary shares of...

Reporting of Equity in Consolidation Paris Cosmetics purchased all of the of the ordinary shares of All Mineral Company for Cash on January 1, 2019. The separate balance sheets of the two corporations before consolidation appeared as follows (not necessarily in order):

During purchase negotiations, Paris Cosmetics determined the appraised value of All Minerals Patents were €20,000 and their inventory was 19,500; and all of the remaining assets and liabilities were appraised at values approximating their book values.

Paris Cosmetics

All Minerals

Consolidating Adjustments

Consolidated

Investment in All Minerals

700,000

------

PPE, net

1,150,000

500,000

Inventory

740,000

21,500

Accounts Payable

400,000

125,000

Share Capital-- Ordinary

1,400,000

300,000

Accounts Receivable

165,000

95,000

Patents

20,000

15,000

Cash

?

?

Note Payable

500,000

35,000

Goodwill

------

-----

Retained earnings

600,000

240,000

During purchase negotiations, Paris Cosmetics determined the appraised value of All Minerals Patents were €20,000 and their inventory was 19,500; and all of the remaining assets and liabilities were appraised at values approximating their book values.

  1. Determine how much will be ascribed to goodwill? (Hint: What is the definition of goodwill?) (5 points)
  2. Prepare the consolidated Balance Sheet. Use the EU version of IFRS. Order is important. (10 points)
  3. Prepare journal entry to record transactions

Solutions

Expert Solution

Consolidated Balance Sheet
Particulars Paris Cosmetics All Minerals Consolidating Adjustments Consolidated
Assets
Investment in All Minerals 700000 -700000 0
PPE, net 1150000 500000 0 1650000
Inventory 740000 21500 -2000 759500
Goodwill 157000 157000
Accounts Receivable 165000 95000 0 260000
Patents 20000 15000 5000 40000
Cash 125000 68500 0 193500
Total Assets 2900000 700000 -540000 3060000
Liabilities
Note Payable 500000 35000 0 535000
Accounts Payable 400000 125000 0 525000
Retained earnings 600000 240000 -240000 600000
Share Capital-- Ordinary 1400000 300000 -300000 1400000
Total Liabilities 2900000 700000 -540000 3060000

Note: Cash is balancing figure

Calculation of Goodwill

Add:
PPE, net 500000
Inventory 19500
Accounts Receivable 95000
Patents 20000
Cash 68500
Less:
Note Payable -35000
Accounts Payable -125000
Net Worth (A) 543000
Consideration Paid (B) 700000
Goodwill (B-A) 157000

Related Solutions

Consolidation worksheet Huma Ltd purchased 100% of the outstanding ordinary shares of Sima Ltd on 31...
Consolidation worksheet Huma Ltd purchased 100% of the outstanding ordinary shares of Sima Ltd on 31 December, 2013 at a cost of $196,000. At that date the Share Capital of Sima Ltd was $50,000. The Retained Profits were $86,000. Payment was made in cash $196,000. The fair market value of the fixed assets of Sima Ltd. was $160,000, the cost was $140,000 and the accumulated depreciation was $40,000. Other assets in the accounts of Sima Ltd. had a fair value...
XYZ Ltd is an all equity company financed by 210,000 ordinary shares which have a market...
XYZ Ltd is an all equity company financed by 210,000 ordinary shares which have a market value of $2.50 per share. The company has earnings before interest and tax (EBIT) of $120,000 and a tax rate of 30%. i. What is the current market value of the company? ii. What is the current cost of ordinary equity (return on equity)? If the company raises $200,000 of long term debt at a cost of 9% and uses the proceeds to retire...
With respect to equity markets, explain what ordinary shares and preference shares are. Contrast preference shares...
With respect to equity markets, explain what ordinary shares and preference shares are. Contrast preference shares versus ordinary shares
The following balances in its shareholders’ equity at 1 January: Contributed equity (450 0000 ordinary shares)...
The following balances in its shareholders’ equity at 1 January: Contributed equity (450 0000 ordinary shares)   $2 100 000 Retained earnings 2 225 000 During the year the business had the following transactions 1 Mar. Issued 200 000 ordinary shares for cash at $8 per share. 1 Jul.   Declared a 1 for 10 share dividend, payable 1 August. The shares were trading at $7 per share on 1 July. 15 Aug.    Declared a $0.50 per share cash dividend of record...
On January 3, 2018, Dart Co. purchased 500 shares of Mina Corp. ordinary shares for P36,000....
On January 3, 2018, Dart Co. purchased 500 shares of Mina Corp. ordinary shares for P36,000. On December 2, 2019, Dart received 500 stock rights from Mina. Each right entitles the holder to acquire one share of stock for P85. The market price of Mina’s stock was P100 a share immediately before the right were issued, and P90 a share immediately after the rights were issued. Dart sold its rights on December 31, 2020, for P10 a right. Dart’s gain...
A bunch of Muslim investors have purchased ordinary shares of the giant Citi Conventional Bank in...
A bunch of Muslim investors have purchased ordinary shares of the giant Citi Conventional Bank in Pakistan on floating but attractive dividend rates through a Musharakah contact of Islamic Finance. Rectify whether this transaction is Shari’ah complaint. If no, discuss the reason.
Yan Corp has equity beta of 0.7 and 8 million ordinary shares, at the current market...
Yan Corp has equity beta of 0.7 and 8 million ordinary shares, at the current market price of RM5. The company also has debt with nominal value of RM100 per bond at 6% coupon rate, which will be redeemed in 5 years’ time at nominal rate. The bonds have a total nominal value of RM10 million. Interest on the bonds has just been paid and the current market value of each bond is RM106.30. Yan plans to acquire a business...
Rea Vipingo Limited has a cost of equity of 10%. Currently it has 500,000 ordinary shares...
Rea Vipingo Limited has a cost of equity of 10%. Currently it has 500,000 ordinary shares which are quoted at the stock Exchange at $120 per share. The company’s earnings per share is $ 10 and it intends to maintain a dividend payout ratio of 50% at the end of the current financial year. The expected net income for the current year is $6 million and available investment proposals are estimated to cost $12 million.            Required: Using the Modigliani...
Accounting for Consolidation Carina Ltd has acquired all the shares of Finn Ltd on 1 July...
Accounting for Consolidation Carina Ltd has acquired all the shares of Finn Ltd on 1 July 2019 for $ 225 000. The accountant for Carina Ltd, having studied the requirements of AASB 3 Business Combinations, realises that all the identifiable assets and liabilities of Finn Ltd must be recognised in the consolidated financial statements at fair value. Although he is happy about the valuation of these items, he is unsure of a number of other matters including pre-acquisition entries and...
On December 31, Year 2, Palm Inc. purchased 80% of the outstanding ordinary shares of Storm...
On December 31, Year 2, Palm Inc. purchased 80% of the outstanding ordinary shares of Storm Com­pany for $350,000. At that date, Storm had ordinary shares of $240,000 and retained earnings of $64,000. In negotiating the purchase price, it was agreed that the assets on Storm’s statement of financial position were fairly valued except for plant assets, which had a $44,000 excess of fair value over carrying amount. It was also agreed that Storm had unrecognized intangible assets consisting of...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT