ACCT 301 Lecture Notes - Cost Accounting, Chapter 27, Equity (Finance)

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bronzealpaca588

25 Feb 2013

School

University of Calgary

Department

Accounting

Course

ACCT 301

Professor

All

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Document Summary

Group accounts are required when a company acquires another company. The first company is called the holding or parent company and it controls the latter company, which is called the subsidiary. Group accounts basically consist of a consolidated balance sheet, which is a balance sheet that shows the net assets that the holding company controls and the ownership of those assets. The group"s capital and reserves consist of the holding company"s capital and reserve and the group share of post-acquisition retained reserves of the subsidiary company. It also consists of what is called minority interest. The preparation of the group"s consolidated balance sheet. Step 1 you must first make sure at what date the acquisition took place. The reason for this is to have a clear picture in your mind concerning the events that occurred at the acquisition date and those of which occurred since.

Related Questions

Determining ending balances of accounts on the consolidated balance sheet
Assume that the parent company acquires its subsidiary by exchanging 75,400 shares of its Common Stock, with a fair value on the acquisition date of $30 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiaryâs assets and liabilities at an amount equaling their book values except for a building that is undervalued by $480,000, an unrecorded License Agreement with a fair value of $230,000, and an unrecorded Customer List owned by the subsidiary with a fair value of $120,000. Any further discrepancy between the purchase price and the book value of the subsidiaryâs Stockholdersâ Equity is attributed to expected synergies to be realized by the consolidated company as a result of the acquisition.

a. Given the following acquisition-date balance sheets of the parent and subsidiary, at what amounts will each of the following be reported on the consolidated balance sheet? (see table numbered 1-7 to answer)

Balance Sheet	Parent	Subsidiary
Assets
Cash	$728,400	$181,440
Accounts receivable	307,200	375,840
Inventory	465,600	482,760
Equity investment	2,262,000
Property, plant and equipment (PPE), net	2,000,000	893,160
Total Assets	$5,763,200	$1,933,200
Liabilities and stockholdersâ equity
Accounts payable	$150,480	$114,300
Accrued liabilities	176,640	198,900
Long-term liabilities	1,062,320	540,000
Common stock	176,000	108,000
APIC	2,992,000	135,000
Retained earnings	1,205,760	837,000
Total Liabilities and stockholdersâ equity	$5,763,200	$1,933,200

1.	Accounts Receivable $_________
2.	Equity Investment $_________

3.	PPE, net $________
4.	Goodwill $________
5.	Common Stock $________
6.	APIC $________
7.	Retained Earnings	$________

b. What intangible assets will be reported on the consolidated balance sheet and at what amounts?

License Agreement $________

Customer List $________

Goodwill $________

ultramarinedog933

Lea Company acquired all of Tenzing Corporation's stock on January 1, 20X6 for $150,000 cash. On December 31, 20X8, the trial balances of the two companies were as follows:

	Lea company		Tenzing Corp.
	Debit	Credit	Debit	Credit
Cash	$90,000		$58,000
Accounts Receivable	97,000		55,000
Land	80,000		45,000
Buildings and Equipment	300,000		200,000
Investment in Tenzing Corporation	180,000
Cost of Services Provided	140,000		75,000
Depreciation Expense	30,000		20,000
Other Expenses	70,000		35,000
Dividends Declared	40,000		20,000
Accumulated Depreciation		$180,000		$100,000
Accounts Payable		42,000		18,000
Taxes Payable		20,000		20,000
Notes Payable		75,000		50,000
Common Stock		100,000		50,000
Retained Earnings		265,000		90,000
Service Revenue		300,000		180,000
Income from Subsidiary		45,000
	$1,027,000	$1,027,000	$508,000	$508,000

Tenzing Corporation reported retained earnings of $75,000 at the date of acquisition. The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of five years from the date of acquisition. At December 31, 20X8, Tenzing owed Lea $4,000 for services provided.

4. Based on the preceding information, all of the following are consolidating entries required on December 31, 20X8, to prepare consolidated financial statements, except:

A)	Common Stock	50,000
	Retained Earnings	90,000
	Income from Tenzing Corp.	50,000
	Dividends declared		20,000
	Investment in Tenzing Corp.		170,000
B)	Accounts Payable	4,000
	Accounts Receivable		4,000
C)	Depreciation Expense	5,000
	Income from Tenzing Corp.		5,000
D)	Buildings and Equipment	20,000
	Accumulated Depreciation		10,000
	Investment in Tenzing Corp.		10,000

Option A

Option B

Option C

Option D

5. Based on the preceding information, what amount will be reported as total assets in the consolidated balance sheet for 20X8?

$666,000

$747,000

$651,000

$946,000

6. Based on the preceding information, what amount will be reported for total accounts payable in the consolidated balance sheet for the year 20X8?

$56,000

$46,000

$60,000

$42,000

bluewater-buffalo592

On December 31, 200X P Corporation paid $300,000 cash for 80% ofthe
common stock of S Company which becomes a subsidiary.Following
*information is shown prior to the acquisition beingrecorded:*

P Company
Assets		Liabilities and Equity
Cash	580,000	Liabilities	90,000
Inventories	60,000
Plant	340,000	Common Stock, $5pv	100,000
		Paid in Capital	200,000
		Retained Earnings	590,000
Total	980,000	Total	980,000


S Company
Assets		Liabilities and Equity
Inventories	20,000	Liabilities	30,000
Other assets	40,000	Long Term Debt	50,000
Plant	140,000	Common Stock, $10pv	40,000
		Paid in Capital	20,000
		Retained Earnings	60,000
Total	200,000	Total	200,000


S market values are:
	Plant	$250,000
	Inventory	$50,000

1. Prepare the entries in journal format to record theacquisition
and post to the general edger accounts.
2. Prepare a consolidation workpaper.
3. Prepare consolidated balance sheet.

harlequinleopard136

ACCT 301 Lecture Notes - Cost Accounting, Chapter 27, Equity (Finance)

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