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Question;11.;Supernova Company had the following summarized;balance sheet on December 31, 20X1;Assets;$;200,000;Accounts;receivable....................................;Inventory..............................................;450,000;Property and plant (net)...............................;600,000;Goodwill...............................................;150,000................................................Total;$1,400,000;==========;Liabilities;and Equity;$;600,000;Notes payable..........................................;Common stock, $5;par...................................;300,000;Paid-in capital in excess of;par.......................;400,000;Retained earnings......................................;100,000................................................Total;$1,400,000;==========;The fair;value of the inventory and property and plant is $600,000 and $850,000;respectively.;Required;a.;Assume that Redstar Corporation purchases 100% of;the common stock of Supernova Company for $1,800,000. What value will be;assigned to the following accounts of the Supernova Company when preparing a;consolidated balance sheet on December 31, 20X1?;(1);Inventory;(2);Property and plant;(3);Goodwill;(4) Noncontrolling interest;b. Prepare a;supporting determination and distribution of excess schedule.;2-23;Chapter 2;12.;Saturn Company had the following summarized balance;sheet on December 31, 20X1;Assets;$;180,000;Accounts;receivable....................................;Inventory..............................................;500,000;Property and plant (net)...............................;600,000;Goodwill...............................................;120,000................................................Total;$1,400,000;==========;Liabilities;and Equity;$;600,000;Notes payable..........................................;Common stock, $5;par...................................;300,000;Paid-in capital in excess of;par.......................;400,000;Retained earnings......................................;100,000................................................Total;$1,400,000;==========;The fair;value of the inventory and property and plant is $600,000 and $850,000;respectively.;2-24;Chapter 2;Required;a.;Assume that Return Corporation purchases 80% of the;common stock of Saturn Company for $600,000. What value will be assigned to the;following accounts of the Saturn Company when preparing a consolidated balance;sheet on December 31, 20X1?;(1);Inventory;(2);Property and plant;(3);Goodwill;(4) Noncontrolling interest;b. Prepare a;supporting determination and distribution of excess schedule.;2-25;Chapter 2;6.;Pluto purchased 100% of the common stock of the;Saturn Company for $325,000 when Saturn had the following balance sheet;Assets;$ 50,000;Current;assets.........................................;Inventory..............................................;60,000;Property and;plant.....................................;300,000;Accumulated;depreciation...............................;(110,000);Total................................................;$ 300,000;=========;Liabilities;and Equity;$ 50,000;Current;liabilities....................................;Common stock, $5;par...................................;100,000;Pain-in capital in excess of;par.......................;50,000;Retained;earnings......................................;100,000;Total................................................;$300,000;========;The fair value of the plant is $250,000.;The;purchase is a tax free exchange as to the seller, thus, the purchaser will be;able to depreciate only the book value of the assets purchased. The applicable;tax rate is 30%.;Required;a. At what;amount will the following accounts be listed on the consolidated balance sheet;prepared on the date of purchase?;(1);Inventory;(2);Property and plant;(3);Deferred tax liability;(4);Goodwill;17.Prepare a;supporting determination and distribution of excess schedule.;2-26;Chapter 2;14.;Fortuna Company issued 51,500 shares of $1 par;stock, with a fair value of $21 per share, for 80% of the outstanding shares of;Acappella Company. The firms had the following separate balance sheets prior to;the acquisition:.............................;Assets;Fortuna;Acappella;Current assets;$;$2,100,000;960,000;Property;plant, and equipment (net)........;4,600,000;1,300,000;Goodwill...................................;240,000...............................Totalassets;$6,700,000;$2,500,000;==========;==========;Liabilities;and Stockholders' Equity;$;800,000;Liabilities................................;$3,000,000;Common stock ($1;par)......................;800,000;200,000;Common stock ($5;par)......................;2,200,000;Paid-in capital in excess of;par...........;300,000;Retained earnings..........................;700,000;1,200,000...............Totalliabilitiesandequity;$6,700,000;$2,500,000;==========;==========;Book values;equal fair values for the assets and liabilities of Acappella Company, except;for the property, plant, and equipment, which has a fair value of $1,600,000.;2-27;Chapter 2;Required;a. Prepare a determination and;distribution of excess schedule.;b.;Provide all eliminations on the partial balance;sheet worksheet provided in Figure 2-8 and complete the noncontrolling interest;column.;ESSAY;1.;Historically the SEC and the FASB have considered;majority ownership to define control as a necessary condition prior to;preparing consolidating financial statements. Now, both of these organizations;are considering a change in the definition of control.;Discuss the;historical perspective on consolidation and now under what situations control;would be considered appropriate without majority ownership. In your response;describe the function of consolidated financial statements.;2-28;Chapter 2;2.;iscuss the conditions under which the FASB would;assume a presumption of control. Additionally, under what circumstances might the;FASB require consolidation even though the parent does not control the;subsidiary? 3.;A parent company purchases an 80% interest in a subsidiary;at a price high enough to revalue all assets and allow for goodwill on the;interest purchased. If "push down accounting" were used in;conjunction with the "economic entity concept," what unique;procedures would be used that are not normally used for such an 80% purchase?;="msonormal">

 

Paper#44354 | Written in 18-Jul-2015

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