User Account

All Pages

modern advanced accounting, Financial Accounting

Assignment Help:
Problem 1 (28 marks)

Pre-Contribution Balance Sheets and Fair Values
June 30, 20X9
(in thousands of $)

Swag Co. Perk Ltd.
Pre-
Contribution Fair
Value Pre-
Contribution Fair
Value
Assets:
Cash and cash equivalents 1,645 1,645 840 840
Accounts receivable 1,400 1,400 1,260 1,260
Land 3,500 5,950 - -
Building (net) 9,450 7,700 5,880 7,700
Equipment (net) 420 525 2,170 2,800
Total assets 16,415 10,150

Liabilities and
shareholders’ equity:
Accounts payable 455 455 770 770
Long-term debt 1,400 1,400 700 630
Total liabilities 1,855 1,470
Common shares 10,500 4,865
Retained earnings 4,060 3,815
Total shareholders’ equity 14,560 8,680
Total liabilities and
shareholders’ equity
16,415
10,150

Swag Co. acquired Perk on June 30, 20X9. Both companies have June 30 year-ends. Before the combination, Swag and Perk had, respectively, 840,000 and 525,000 common shares, issued and outstanding.


Required:

Prepare Swag’s consolidated balance sheet under each of the following independent situations:

a) Swag purchased the assets and assumed the liabilities of Perk by
paying $1,400,000 in cash and issuing a $12,600,000 note.
(6 marks)

b) Swag issued 280,000 common shares in exchange for all of
Perk’s outstanding shares. The fair value of the Swag shares
was $14,000,000. (10 marks)

c) In exchange for all of Perk’s outstanding shares, Swag paid
$700,000 cash and issued 189,000 common shares with a
market value of $9,450,000. (12 marks)



Problem 2 (50 marks)

Balance Sheets
December 31, 20X3

Green Tower
Ltd. Blue Loft
Ltd.
Assets:
Current assets:
Cash $ 156,000 $ 143,000
Accounts receivable 195,000 175,500
Inventory 312,000 253,500
Total current assets 663,000 572,000
Land 923,000 -
Equipment 897,000 1,183,000
Accumulated amortization (663,000) (416,000)
Investment in Blue Loft 1,409,200 -
Goodwill* 98,800 __-____
Total assets 3,328,000 1,339,000
Liabilities and shareholders’ equity:
Liabilities:
Accounts payable 184,600 78,000
Bonds payable 780,000 260,000
Total liabilities 964,600 338,000
Shareholders’ equity:
Common shares 650,000 325,000
Retained earnings 1,713,400 676,000
Total shareholders’ equity 2,363,400 1,001,000
Total liabilities and shareholders’ equity $3,328,000 $1,339,000
*from an acquisition prior to Blue Loft


Income Statements
Year Ended December 31, 20X3

Green Tower
Ltd. Blue Loft
Ltd.
Sales revenue $1,560,000 $1,283,100
Cost of goods sold 1,040,000 845,000
520,000 438,100
Gain on sale of land ___-___ 273,000
520,000 711,100
Operating expense 305,500 464,100
Net income 214,500 247,000


Statements of Retained Earnings
Year Ended December 31, 20X3

Green Tower
Ltd. Blue Loft
Ltd.
Retained earnings, December 31, 20X2 $1,498,900 $ 429,000
Net income 214,500 247,000
Retained earnings, December 31, 20X3 $1,713,400 $ 676,000

Blue Loft Ltd.
Carrying and Fair Values
January 1, 20X2

Carrying
Value Fair
Value
Cash $ 104,000 $ 104,000
Accounts receivable 128,700 128,700
Inventory 231,400 253,500
Land 650,000 811,000
Equipment 390,000 151,000
Accumulated amortization (260,000)
Accounts payable 91,000 91,000
Bonds payable 260,000 260,000
Common shares 325,000 -
Retained earnings 568,100 -


• On January 1, 20X2, Green Tower Ltd. acquired all the outstanding common shares of Blue Loft Ltd. for $1,409,200 cash.

• At December 31, 20X2, Green Tower’s inventory included goods that it had purchased from Blue Loft for $58,500. The intercompany profit on these goods was $15,600. All these goods were sold to third parties in 20X3.

• During 20X3, Green Tower purchased goods from Blue Loft for $195,000. Blue Loft earned a gross profit of $65,000 on this sale. At December 31, 20X3, Green Tower still had 40% of these goods in its inventory.

• During 20X3, Green Tower sold goods to Blue Loft for $507,000. Green Tower earned a gross profit of $117,000 on this sale. At December 31, 20X3, Blue Loft still had 20% of these goods in its inventory.

• In December, 20X3, Blue Loft sold a tract of land to Green Tower for $923,000. Blue Loft had purchased the land 8 years ago for $650,000.

• At the time of Green Tower’s acquisition, Blue Loft’s equipment had a remaining estimated useful life of 3 years. Blue Loft uses the straight-line method of amortization, with no residual value.

Required:

Prepare the consolidated financial statements for 20X3 using the direct method.

Problem 3 (22 marks)

Cox Ltd. acquired 70% of the common shares of March Co. at the beginning of 20X7. At the acquisition date, March’s shareholders’ equity consisted of the following:

Common shares $720,000
Retained earnings 360,000

The only acquisition differential pertained to goodwill.

Cox’s “Investment in March” general ledger account is as follows:

1/2/X7 Cost $ 781,200 12/31/X7 Dividends $33,600
12/31/X7 Investment Income 62,160 12/31/X8 Dividends 42,000
12/31/X8 Investment Income 76,440 12/31/X9 Dividends 50,400
12/31/X9 Investment income 94,080

Balance $ 887,880

March usually declares half of its profits as dividends.

Cox uses the entity theory method to consolidate its subsidiary.

Required:

a) Calculate the total amount of dividends declared by March for 20X7. (1 mark)

b) Calculate March’s profit for 20X8. (2 marks)

c) Calculate the non-controlling interest amounts for Cox’s 20X9

i. consolidated income statement, and (3 marks)
ii. consolidated balance sheet. (3 marks)

d) Calculate the amount of goodwill that should appear on Cox’s 20X9 consolidated balance sheet. (13 marks)

Related Discussions:- modern advanced accounting

Calculate the weighted average cost of capital, Verizon Corporation has 55%...

Verizon Corporation has 55% equity and 45% debt (market values) in its capital structure. The pretax cost of debt is 7%, and that of equity 12%. The total value of the company is $

The matching rule is applied ?, The matching rule is applied a. because it ...

The matching rule is applied a. because it is required by the Internal revenue Code b. by expensing certain items immediately and in their entirety c. to help make the bookkeeper's

Derivatives, On April 10, ABC inc. Enters in a swap contract for 10 years w...

On April 10, ABC inc. Enters in a swap contract for 10 years with a chartered bank to turn a fixed rate on liability of $150 million to floating rate. ABC wants to receive interest

Net realizable value of the accounts receivable, After the accounts are adj...

After the accounts are adjusted at the end of the year, Accounts Receivable has a balance of $215,000, Uncollectible Accounts Expense has a balance of $17,500, and Allowance for Do

The trustee in bankruptcy, THE TRUSTEE IN BANKRUPTCY 1) Appointment o...

THE TRUSTEE IN BANKRUPTCY 1) Appointment of trustee The trustee is appointed: By the creditors by ordinary resolution, or By the committee of inspection, if so

Petition by creditor-bankruptcy, Petition by creditor Any creditor incl...

Petition by creditor Any creditor including an assignee of a debt, may petition, provided: The debt due to him amounts to at least Shs 1,000; The debt is certain and i

Economic substance, economic substance as in recognition of revenue

economic substance as in recognition of revenue

Define the term relevance - accounting information, Define the term Relevan...

Define the term Relevance - accounting information Accounting information should have the ability to influence decisions. Except this characteristic is present, there is ac

What is the net cash provided by investing activities, Zoum Corporation had...

Zoum Corporation had the following transactions during 2014: 1. Issued $125,000 of par value common stock for cash. 2. Recorded and paid wages expense of $60,000. 3. Acquired land

Determine the optimal price for each sub-group, The objective is to assess ...

The objective is to assess the incentive to acquire information on consumer characteristics. We consider a monopoly. The firm incurs no production cost. There are M consumers with

Joe

6/21/2013 9:44:37 PM

Any answers?

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd