ACC 331 Chapter Notes - Chapter 3: Accounts Receivable, Accounts Payable, Intangible Asset
Get access
Related Documents
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 $________ |
Review of pre-consolidation equity method (controlling investment in affiliate, fair value differs from book value)
Assume an investee has the following financial statement information for the three years ending December 31, 2013:
(At December 31) | 2011 | 2012 | 2013 |
---|---|---|---|
Current assets | $310,500 | $416,550 | $428,205 |
Tangible fixed assets | 844,500 | 861,450 | 992,595 |
Intangible assets | 75,000 | 67,500 | 60,000 |
Total assets | $1,230,000 | $1,345,500 | $1,480,800 |
Current liabilities | $150,000 | $165,000 | $181,500 |
Noncurrent liabilities | 330,000 | 363,000 | 399,300 |
Common stock | 150,000 | 150,000 | 150,000 |
Additional paid-in capital | 150,000 | 150,000 | 150,000 |
Retained earnings | 450,000 | 517,500 | 600,000 |
Total liabilities and equity | $1,230,000 | $1,345,500 | $1,480,800 |
(For they year ended December 31) | 2011 | 2012 | 2013 |
---|---|---|---|
Revenues | $1,275,000 | $1,380,000 | $1,455,000 |
Expenses | 1,162,500 | 1,260,000 | 1,314,000 |
Net income | $112,500 | $120,000 | $141,000 |
Dividends | $37,500 | $52,500 | $58,500 |
Assume that on January 1, 2011, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investee's identifiable net assets had fair values that approximated their historical book values. In addition, the acquisition resulted in no goodwill or bargain purchase gain recognized in the consolidated financial statements of the investor company. Assuming that the investor company uses the equity method to account for its investment in the investee, what is the balance in the "investment in investee" account in the investor company's preconsolidation balance sheet on December 31, 2013?
A. $900,000
B. $750,000
C. $675,000
D. $1,480,800
Assume that on January 1, 2011, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investee's identifiable net assets had fair values that approximated their historical book values. In addition, the acquisition resulted in no goodwill or bargain purchase gain recognized in the consolidated financial statements of the investor company. Assuming that the investor company uses the equity method to account for its investment in the investee, what is the balance in the "income from investee" account in the investor company's preconsolidation income statement for the year ended December 31, 2013?
A. $58,500
B. $141,000
C. $112,500
D. $82,500