Question
In: Accounting
AG acquired 80 percent of the shares of its subsidiary LM on January 1, Year 5.On...
- AG acquired 80 percent of the shares of its subsidiary LM on January 1, Year 5.On this date the fair value of the land of LM was greater than its carrying value. Which of the combinations of LM’s net book value (NBV) and fair value increments (FVI) would be included in its consolidated assets values for land on December 31, year 6?
- 80 percent of NBV and 90 Percent of FVI.
- 100 percent of NBV and 90 Percent of FVI.
- 100 percent of NBV and 100 Percent of FVI
- 80 percent of NBV and 80 Percent of FV
Solutions
Expert Solution
Given case AG acquired 80% of the shareholding of its subsidiary LM on January 1, year 5.
On the date the fair value of the land of LM is greater than its carrying value.
In that case the AG is required to make consolidated financial statements, preparation of consolidated financial statements the AG company has to record all the assets and liabilities of the LM company to the proportionate to the shares held with the AG company.
Which is as follows :-
AG company holding as 80% and non controlling interest as 20%
As per above provided information the AG company has to consolidate all the value of assets and liabilities of 80% of the LM company in its consolidated financial statements.
As per above given procedure, the value of land to be consolidated as 80% of net book value and 80% of fair value increments.
as per international financial reporting standards every company has to evaluate its assets and liabilities based on the fair value of the respective assets and liabilities. But not given case LM didn't revised the value of land. In this case the parent company takes 80% of the net book value of the land and 80% of the fair value increments for preparation of consolidated financial statements.
the right of AG company in LLM company is limited to 80%, so the value of land to be consolidated and also the fair value increments to be taken to the parent company is limited to 80% only.
The answer is option d.
These are all the information required to solve the above given question.
If there is any clarification required regarding the above provided answer, please mention them in comment box.
I hope, all the above mentioned information and explanations are useful and helpful to you.
Thank you.
ekkarill92 answered 2 years agoRelated Solutions
On January 1, Patterson Corporation acquired 80 percent of the 100,000 outstanding voting shares of Soriano,...
On January 1, Patterson Corporation acquired 80 percent of the
100,000 outstanding voting shares of Soriano, Inc., in exchange for
$31.25 per share cash. The remaining 20 percent of Soriano’s shares
continued to trade for $30 both before and after Patterson’s
acquisition.
At January 1, Soriano’s book and fair values were as follows
Book Values
Fair Values
Remaining Life
Current assets
$80,000
$80,000
Buildings and equipment
$1,250,000
$1,000,000
5 years
Trademarks
$700,000
$900,000
10 years
Patented technology
...
On January 1, Patterson Corporation acquired 80 percent of the 100,000 outstanding voting shares of Soriano,...
On January 1, Patterson Corporation acquired 80 percent of the
100,000 outstanding voting shares of Soriano, Inc., in exchange for
$31.25 per share cash. The remaining 20 percent of Soriano’s shares
continued to trade for $30 both before and after Patterson’s
acquisition.
At January 1, Soriano’s book and fair values were as follows
Book
Values
Fair
Values
Remaining
Life
Current assets
$80,000
$80,000
Buildings and equipment
$1,250,000
$1,000,000
5 years
Trademarks
$700,000
$900,000
10 years
Patented technology
...
On January 1, Patterson Corporation acquired 80 percent of the 100,000 outstanding voting shares of Soriano,...
On January 1, Patterson Corporation acquired 80 percent of the
100,000 outstanding voting shares of Soriano, Inc., in exchange for
$31.25 per share cash. The remaining 20 percent of Soriano’s shares
continued to trade for $30 both before and after Patterson’s
acquisition.
At January 1, Soriano’s book and fair values were as follows
Book
Values
Fair
Values
Remaining
Life
Current assets
$80,000
$80,000
Buildings and equipment
$1,250,000
$1,000,000
5 years
Trademarks
$700,000
$900,000
10 years
Patented technology
...
Pitino acquired 80 percent of Brey's outstanding shares on January 1, 2016, in exchange for $369,000...
Pitino acquired 80 percent of Brey's outstanding shares on
January 1, 2016, in exchange for $369,000 in cash. The subsidiary's
stockholders' equity accounts totaled $353,000 and the
noncontrolling interest had a fair value of $92,250 on that day.
However, a building (with a ten-year remaining life) in Brey's
accounting records was undervalued by $19,000. Pitino assigned the
rest of the excess fair value over book value to Brey's patented
technology (five-year remaining life).
Brey reported net income from its own...
Pitino acquired 80 percent of Brey's outstanding shares on January 1, 2016, in exchange for $369,000...
Pitino acquired 80 percent of Brey's outstanding shares on
January 1, 2016, in exchange for $369,000 in cash. The subsidiary's
stockholders' equity accounts totaled $353,000 and the
noncontrolling interest had a fair value of $92,250 on that day.
However, a building (with a ten-year remaining life) in Brey's
accounting records was undervalued by $19,000. Pitino assigned the
rest of the excess fair value over book value to Brey's patented
technology (five-year remaining life).
Brey reported net income from its own...
Pitino acquired 80 percent of Brey's outstanding shares on January 1, 2019, in exchange for $369,000...
Pitino acquired 80 percent of Brey's outstanding shares on
January 1, 2019, in exchange for $369,000 in cash. The subsidiary's
stockholders' equity accounts totaled $353,000, and the
noncontrolling interest had a fair value of $92,250 on that day.
However, a building (with a ten-year remaining life) in Brey's
accounting records was undervalued by $19,000. Pitino assigned the
rest of the excess fair value over book value to Brey's patented
technology (five-year remaining life).
Brey reported net income from its own...
Peanut Corporation acquired 80 percent of Snoopy Company's voting shares on January 1, 20X8, at underlying...
Peanut Corporation acquired 80 percent of Snoopy Company's
voting shares on January 1, 20X8, at underlying book value. On Dec.
31, 20X8, it also purchased $500,000 par value 8 percent Snoopy
bonds, which had been issued on January 1, 20X5 to Schulz
Corporation (unaffiliated with either Peanut or Snoopy) at a
$45,000 premium. The bonds were originally issued with a 12-year
maturity and pay interest annually on December 31. During
preparation of the consolidated financial statements for December
31, 20X8,...
Assume that a parent company acquired 80% of a subsidiary on January 1, 2014. The purchase...
Assume that a parent company acquired 80% of a subsidiary on
January 1, 2014. The purchase price was $175,000 in excess of the
subsidiary’s book value of Stockholders’ Equity on the acquisition
date, and that excess was assigned entirely to an unrecorded Patent
owned by the subsidiary. The assumed economic useful life of the
patent is 10 years.
Assume that subsidiary sells inventory to the parent. The
parent, ultimately, sells the inventory to customers outside of the
consolidated group. You...
On January 1, 2016, Aronsen Company acquired 80 percent of Siedel Company’s outstanding shares. Siedel had...
On January 1, 2016,
Aronsen Company acquired 80 percent of Siedel Company’s outstanding
shares. Siedel had a net book value on that date of $410,000:
common stock ($10 par value) of $200,000 and retained earnings of
$210,000.
Aronsen paid $656,000
for this investment. The acquisition-date fair value of the 20
percent noncontrolling interest was $164,000. The excess fair value
over book value associated with the acquisition was used to
increase land by $350,000 and to recognize copyrights (12-year
remaining life)...
On January 1, 2016, Aronsen Company acquired 80 percent of Siedel Company’s outstanding shares. Siedel had...
On January 1, 2016, Aronsen Company acquired 80 percent of
Siedel Company’s outstanding shares. Siedel had a net book value on
that date of $630,000: common stock ($14 par value) of $280,000 and
retained earnings of $350,000.
Aronsen paid $640,000 for this investment. The acquisition-date
fair value of the 20 percent noncontrolling interest was $160,000.
The excess fair value over book value associated with the
acquisition was used to increase land by $110,000 and to recognize
copyrights (12-year remaining life)...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Compare the MOSFET, JFET , and BJT and identify the reasons these devices behave differently. What...
- How would you use SAS Enterprise Miner to create a neural network model of your example?
- Explain the use of neural networking modeling in predictive analytics.
- Current Market Mix of Netflix, as detail as possible, please.
- This is all one question, thank you so much in advance! You must evaluate a proposal...
- X Company is considering the purchase of a new processor that costs $200,000. Shipping and setup...
- There are a large number of tasks involved in information technology and programming, and many of...
ADVERTISEMENT