Assume that, on January 1, 2019, P Company acquired a 70% interest in its subsidiary, S Company. The aggregate fair value of the controlling and noncontrolling interest was $400,000 in excess of S Company’s Stockholders’ Equity on the acquisition date. The parent uses the equity method to account for its investment in S company. The parent assigned the acquisition accounting premium (AAP) as follows:

P Company and S Company report the following financial statements at December 31, 2023:

15.       Based on the given financial statements, the computation of the pre-consolidation income (loss) from subsidiary of $74,000 reported by the parent includes a deduction for:

a.   $25,000 for excess attributable to depreciation and amortization

b.   $34,000 for excess attributable to depreciation and amortization

c.   $13,125 for 70% of dividends declared and paid by S Company

d.   $75,600 for 70% of the net income of subsidiary

16.       The December 31, 2023 pre-consolidation balance of the equity investment accounting equals $1,331,475 (i.e., 5 years subsequent to the acquisition).

On this date, the equity investment balance implicitly includes:

a.   Dividends, $121,290

b.   Goodwill, $60,000

c.   Goodwill, $48,000

d.   Unamortized AAP excluding Goodwill, $204,000

On January 1, 2018, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $283,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $20,500 to accountants, lawyers, and brokers for assistance in the acquisition and another $5,500 in connection with stock issuance costs.

Prior to these transactions, the balance sheets for the two companies were as follows:

Note: Parentheses indicate a credit balance.

In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $8,300, Land by $23,200, and Buildings by $42,200. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary.

QUESTION: WHAT AMOUNT WILL BE FOR PAID-IN CAPITAL AND RETAINED EARNINGS?

Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January 1, 2017. In exchange, Francisco paid $883,500 in cash and issued 106,000 shares of its own $1 par value common stock. On this date, Francisco’s stock had a fair value of $12 per share. The combination is a statutory merger with Beltran subsequently dissolved as a legal corporation. Beltran’s assets and liabilities are assigned to a new reporting unit.

The following reports the fair values for the Beltran reporting unit for January 1, 2017, and December 31, 2018, along with their respective book values on December 31, 2018.

1. Prepare Francisco’s journal entry to record the assets acquired and the liabilities assumed in the Beltran merger on January 1, 2017.

2. On December 31, 2018, Francisco opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value of the entire Beltran reporting unit is $1,826,500. What amount of goodwill impairment, if any, should Francisco recognize on its 2018 income statement?

Harrier Ltd began operations on 1 July 2016. During the following year, the company acquired a tract of land, demolished the building on the land and built a new factory. Equipment was acquired for the factory and, in March 2017, the factory was ready. A gala opening was held on 18 March, with the local parliamentarian opening the factory. The first items were ready for sale on 25 March.

During this period, the following inflows and outflows occurred.

Required
Using the information provided, determine what assets Harrier Ltd should recognise and the amounts at which they would be recorded.

On January 5, 2019, Prince Company acquired in cash 3,000 shares of ABC Inc., to keep as short-term marketable securities, at a price of $8.7 per share. To acquire these shares, Prince Company paid additional $900 for commission fees. On April 9, 2019, Prince Company sold 2,000 of these shares for $9.2 per share. Prince Company also paid $250 commission fees for this sale. The sale of marketable securities will result in

a.Gain on sale of investment for $650

b.Gain on sale of investment for $400

c.Loss on sale of investment for $150

d.Gain on sale of investment for $150

.At the end of the first year of operations, the total cost of the marketable securities that ABC Company holds is $146,000. During the second year, half of these securities are sold for $86,500 cash. Which of the following is true regarding the sale of the marketable securities in the second year?

a.The unrealized holding gain on investment is $13,500.

b.The loss on sale of investment is $13,500

c.The gain on sale of investment is $86,500

d.The gain on sale of investment is $13,500

Note: Parentheses indicate a credit balance.

In a pre-2009 business combination, Acme Company acquired all of Brem Company’s assets and liabilities for cash. After the combination, Acme formally dissolved Brem. At the acquisition date, the following book and fair values were available for the Brem Company accounts:

In addition, Acme paid an investment bank $30,900 cash for assistance in arranging the combination.

1. Using the legacy purchase method for pre-2009 business combinations, prepare Acme’s entry to record its acquisition of Brem in its accounting records assuming the following cash amounts of $651,900 and $446,300 were paid to the former owners of Brem.
2. How would these journal entries change if the acquisition occurred post-2009 and therefore Acme applied the acquisition method?

Gibson Manufacturing Company was started on January 1, Year 1, when it acquired $87,000 cash by issuing common stock. Gibson immediately purchased office furniture and manufacturing equipment costing $8,400 and $25,800, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $3,600 salvage value and an expected useful life of three years. The company paid $11,100 for salaries of administrative personnel and $15,800 for wages to production personnel. Finally, the company paid $9,800 for raw materials that were used to make inventory. All inventory was started and completed during the year. Gibson completed production on 4,400 units of product and sold 3,480 units at a price of $15 each in Year 1. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.) Required Determine the total product cost and the average cost per unit of the inventory produced in Year 1. (Round "Average cost per unit" to 2 decimal places.) Determine the amount of cost of goods sold that would appear on the Year 1 income statement. (Do not round intermediate calculations.) Determine the amount of the ending inventory balance that would appear on the December 31, Year 1, balance sheet. (Do not round intermediate calculations.) Determine the amount of net income that would appear on the Year 1 income statement. (Round your answer to the nearest dollar amount.) Determine the amount of retained earnings that would appear on the December 31, Year 1, balance sheet. (Round your answer to the nearest dollar amount.) Determine the amount of total assets that would appear on the December 31, Year 1, balance sheet. (Round your answer to the nearest dollar amount.)

Vernon Manufacturing Company was started on January 1, year 1, when it acquired $77,000 cash by issuing common stock. Vernon immediately purchased office furniture and manufacturing equipment costing $8,400 and $32,800, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $3,200 salvage value and an expected useful life of four years. The company paid $11,700 for salaries of administrative personnel and $15,500 for wages to production personnel. Finally, the company paid $14,360 for raw materials that were used to make inventory. All inventory was started and completed during the year. Vernon completed production on 4,600 units of product and sold 3,610 units at a price of $15 each in year 1. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.)

Required

1. Determine the total product cost and the average cost per unit of the inventory produced in year 1. (Round "Average cost per unit" to 2 decimal places.)

2. Determine the amount of cost of goods sold that would appear on the year 1 income statement. (Do not round intermediate calculations.)

3. Determine the amount of the ending inventory balance that would appear on the December 31, year 1, balance sheet. (Do not round intermediate calculations.)

4. Determine the amount of net income that would appear on the year 1 income statement. (Round your final answer value to the nearest whole dollar.)

5. Determine the amount of retained earnings that would appear on the December 31, year 1, balance sheet. (Round your final answer value to the nearest whole dollar.)

6. Determine the amount of total assets that would appear on the December 31, year 1, balance sheet. (Round your final answer value to the nearest whole dollar.)

Thank you

Walton Manufacturing Company (WMC) was started when it acquired $95,000 by issuing common stock. During the first year of operations, the company incurred specifically identifiable product costs (materials, labor, and overhead) amounting to $55,200. WMC also incurred $78,200 of engineering design and planning costs. There was a debate regarding how the design and planning costs should be classified. Advocates of Option 1 believe that the costs should be classified as general, selling, and administrative costs. Advocates of Option 2 believe it is more appropriate to classify the design and planning costs as product costs. During the year, WMC made 4,600 units of product and sold 4,000 units at a price of $35.00 each. All transactions were cash transactions.

Required

1. a-1. Prepare a GAAP-based income statement and balance sheet under option 1.

2. a-2. Prepare a GAAP-based income statement and balance sheet under option 2.

3. b. Identify the option that results in financial statements that are more likely to leave a favorable impression on investors and creditors.

4. c. Assume that WMC provides an incentive bonus to the company president equal to 14 percent of net income. Compute the amount of the bonus under each of the two options. Identify the option that provides the president with the higher bonus.

5. d. Assume a 35 percent income tax rate. Determine the amount of income tax expense under each of the two options. Identify the option that minimizes the amount of the company’s income tax expense.