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Acadia Corporation created Skinny Company as a wholly owned subsidiary by transferring assets and accounts payable to Skinny in exchange for its common stock.




Question #1;Acadia Corporation created Skinny Company as a wholly owned subsidiary by transferring assets and accounts payable to Skinny in exchange for its common stock. Skinny recorded the following entry when it received the assets and accounts payable;Debit Credit;Cash 5,000;Accounts Receivable 20,000;Inventory 30,000;Land 5,000;Buildings 90,000;Equipment 40,000;Accounts Payable 17,000;Accumulated Depreciation- Buidlings 31,000;Accumulated Depreciation - Equipment 15,000;Common Stock 50,000;Additional Paid in Capital 77,0000;Required;a. What was Acadia?s book value of the total assets (not net assets) transferred to Skinny Company?;b. What amount did Acadia report as its investment in Skinny after the transfer?;c. What number of shares of $10 par value stock did Skinny issue to Acadia?;d. What impact did the transfer of assets and accounts payable have on the amount reported by Acadia as total assets?;e. What impact did the transfer of assets and accounts payable have on the amount that Acadia and the consolidated entity reported as shares outstanding?;Question #2;Apple Company paid $205,000 to acquire the net assets of Pop Company on April 1, 2014. The balance sheet data for the two companies and fair value information for Pop immediately before the business combination are as follows;Apple Company;Pop Company;Balance Sheet Items;Book Value;Book Value;Fair Value;Cash & Receivables;$380,000;$55,000;$55,000;Inventory;100,000;35,000;45,000;Land;150,000;35,000;50,000;Building & Equipment;280,000;310,000;150,000;Less: Acc. Depreciation;(90,00);(200,000);$820,000;$235,000;$300,000;Current Liabilities;$185,000;$178,000;$178,000;Capital Stock;$20, Par Value;400,000;$5, Par Value;15,000;Retained Earnings;235,000;42,000;Total Liabilities & Equities;$820,000;$235,000;Required;Give the journal entry (ies) that need to be recorded by Apple when it acquires Pop?s net assets.;Prepare a balance sheet for Apple immediately following the acquisition.;Give the journal entry (ies) that will be recorded by Apple if it acquires all of Pop?s common stock (instead of Pop?s net assets) for $205,000.;Question #3;Universal acquired 60 percent ownership of Omnicare Company on January 1, 2014, for $193,000. At that date, the fair value of the noncontrolling interest was $63,250. The trial balance for the two companies on December 31, 2013, included the following amounts;Universal Corporation Omnicare Company;Item Debit Credit Debit Credit;Cash $58,000 $45,000;Accounts Receivable 70,000 65,000;Inventory 260,000 120,000;Land 100,000 40,000;Buildings & Equipment 520,000 170,000;Investment in Granite 222,000;Cost of Goods Sold 520,000 270,000;Depreciation Expense 45,000 35,000;Other Expenses 95,000 95,000;Dividends Declared 70,000 40,000;Accumulated Deprec. $195,000 $105,000;Accounts Payable 110,000 55,000;Mortgages Payable 240,000 70,000;Common Stock 320,000 70,000;Retained Earnings 310,000 120,000;Sales 720,000 460,000;Income from Subsidiary 65,000;$1,960,000 $1,960,000 $880,000 $880,000;Additional Information;1. On January 1, 2013, Omnicare reported net assets with a book value of $170,000 and a fair value of $211,250.;2. Omnicare depreciable assets have an estimated economic life of 10 years on the date of the combination. The difference between fair value and book value of Omnicare?s net assets is related entirely to buildings and equipment.;3. Universal used the equity method in accounting for its investments in Omnicare.;4. Detailed analysis of receivables and payables showed that Omnicare owed Universal $20,000 on December 31, 2013.;Required;a. Give all journal entries recorded by Universal with regard to its investments in Omnicare during 2013.;b. Give all elimination entries needed to prepare a full set of consolidated financial statements for 2013.;Question #4;Kellogg?s Corporation purchased shares of Swingline Corporation in the following sequence;Date No. of Shares Purchased Amount Paid;January 1, 2013 2,000 shares $35,000;January 1, 2014 500 shares 25,000;January 1, 2015 3,000 shares 90,000;The book value of Swingline?s net assets at January 1, 2013 was $220,000. Each year since Kellogg?s first purchased shares, Swingline has reported net income of $90,000 and paid dividends of $40,000. The amount paid in excess of the book value of Swingline?s net assets was attributed to the increase in the value of identifiable intangible assets with a remaining life of five years at the date the shares of Swingline were purchased. Swingline has had 15,000 shares of voting common stock outstanding throughout the four-year period.;Required;Give the journal entries recorded on Kellogg Corporation?s books in 2015 related to its investment in Swingline Corporation.;Question #5;Heinz Company purchased 19 percent of the outstanding share of Johnston Company for $90,000 on January 1, 2013. The following results are reported for Johnston Company;2013;2014;2015;Net Income;$60,000;$55,000;$80,000;Dividends Paid;35,000;50,000;40,000;Fair Value of Shares held by Grant;January 1;90,000;109,000;106,000;December 31;109,000;106,000;117,000;Required;Determine the amount reported by Heinz as income from its investments in Johnston for each year and the balance in Heinz?s investment in Johnston at the end of each year assuming that Heinz uses the following methods in accounting for its investments in Johnston;Cost method;Equity method;Fair Value method;Question #6;Bands Corporation owns 35 percent of the common stock of Nortel Company, which it purchased at underlying book value on January 1, 2013. Bands reported a balance of $265,000 for its investment in Nortel Company on January 1, 2013, and $296,800 at December 31, 2013. During 2013, Bands and Nortel Company reported operating income of $360,000 and $80,000 respectively. Nortel received dividends from investments in marketable equity securities in the amount of $9,000 during 2013. It also reported an increase of $28,000 in the market value of its portfolio of trading securities and an increase in the value of its portfolio of securities classified as available-for-sale. Nortel paid dividends of $40,000 in 2013. Ignore income taxes in determining your solution.;Required;a. Assuming that Bands uses the equity method in accounting for its investment in Nortel, compute the amount of income from Nortel recorded by Bands in 2013.;b. Compute the amount reported by Nortek as other comprehensive income for 2013.;c. If all of Nortel?s other comprehensive income arose solely from its investment in available for sale securities purchased on March 10, 2013, for 150,000, what was the market value of those securities at December 31, 2013?;Question #7


Paper#75987 | Written in 18-Jul-2015

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