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

Experienced auditor, Experienced Auditor - An AUDITOR who has a reasonable ...

Experienced Auditor - An AUDITOR who has a reasonable understanding of audit activities and has studied company's industry as well as accounting and auditing issues relevant to the

Acc 400, d. Prepare the summary journal entry required to transfer finished...

d. Prepare the summary journal entry required to transfer finished component kits from the Cutting Department to the Finishing Department in January. e. Compute the total cost assi

Items reducing the deficit-liquidation of companies, Items reducing the def...

Items reducing the deficit: Items reducing the deficit would include: (a)    Profits from trading; (b)    Estimated profit on the realisation of assets. Notes: (a) Whe

Financial statements, Describe the following questions:- Q.1 Explain how...

Describe the following questions:- Q.1 Explain how financial statements assist in the capital allocation process. How are financial statements limited? Which financial statement

The paper Contemporary Issues in International Accounting, Requirements: P...

Requirements: Part I Access the IFRS and the Generally Accepted Accounting Principles (GAAP) of your country. a. Note ten differences between the two sets of GAAP. Part II Ac

Identify the depreciation methods, Identify the Depreciation Methods O...

Identify the Depreciation Methods On January 3, 2005, XYZ Distribution Co. paid $224,000 for a computer system. In addition to the basic purchase price, the company paid a set

Prepare general journal entries, Assessment Criteria: Student work will ...

Assessment Criteria: Student work will generally be assessed in terms of the following criteria: 1. Preparation of correct journal entries. 2. Accumulation of journal entr

Accrual Accounting-adjusting entry, What are some examples of adjusting ent...

What are some examples of adjusting entries that are made at the end of the accounting period to bring general lever accounts balance in accordance with GAAP.

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

Joe

6/21/2013 9:44:37 PM

Any answers?

Write Your Message!

Captcha
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!

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