Advanced Accounting – Part 2 Final Quiz Miami Corporation acquires 80,000 shares of Heat Company’s outstanding stock January 1, 2013, y gi!ing the fo""o#ing considerations e"o#$
Cash, %2,000,000
&ssued 80,000 shares of common stock #ith a %'0 fair !a"ue during acquisition date(
) contingent contingent payment of %200,000 cash on *ecemer 31, 201+, if the a!erage income of during the 2year period of 2013 2013 - 201+ e.ceeds %2'0,000 %2'0,000 per year( year( Miami estimates that that there is a 30/ percent change or proai"ity that the %200,000 payment #i"" e required( Miami a"so agreed to issue additiona" ',000 shares if Heat Company #i"" generate cash f"o#s from operation of %1,000,000( %1,000,000( he additiona" additiona" ',000 shares e.pected to e issued are !a"ued at %3',000(
Heat Company deited other recei!a"es for the payments made in comp"eting the acquisition( )cquisition )cquisition costs paid paid #ere as fo""o#s$ roker ’s fee paid to firm that "ocated Heat )ccountant’s )ccountant’s fee fee for preacquisitio preacquisition n ega" fee for contract of usiness comination Cost of of 45 45C re registration, in inc"uding ac accounting and "ega" fe fees %rinting cost of stock certificates issued 6enera" and administrati!e e.penses
10,000 20,000 3',000 20,000 10,000 2',000
7n *ecemer 31, 2012, prior to the usiness comination, the fo""o#ing data are a!ai"a"e$
Common stock, %20 par Common stock, %20 par %aid in capita" in e.cess of par etained earnings
Miami %',000,000 2,'00,000 1,'00,000
Heat % 2,000,000 1,180,000 820,000
7n the same date, the current !a"ue of Heat Company’s identifia"e assets and "iai"ities #ere the same as their carrying !a"ues e.cept for the fo""o#ing assets$ )ssets &n!entories and ui"ding 5quipment Machineries$ Machinery 30 Machinery 101 onds %aya"e
&ncrease 200,000 200,000 200,000
*ecrease 2'/ #ere sti"" unso"d year ended 2013(
100,000
20 years remaining "ife 10 years remaining "ife
20,000
' years remaining "ife 7 years remaining life ' years remaining "ife
30,000 35,000
)t the date date of acquisition acquisition the the fair !a"ue !a"ue of noncontro""in noncontro""ing g interest is estimated to e %1,'00,00 %1,'00,000( 0( 7n )ugust 1, 2013, Miami recei!ed the fina" !a"ue of Heat’s and and ui"ding from the independent appraisa" if fina" !a"ues are compared #ith the pro!isiona" amount gi!en during acquisition date oth assets are sti"" under!a"ued y %300,000 and %100,000, respecti!e"y( 7n 9o!emer 1, 2013, the proai"ity !a"ues that Heat a!erage income #i"" e.ceed %2'0,000 is estimated to increase y +0/(
Inter-company sales of inventory (Under FIFO) Year Year
old to
old from
ales
!ost
"nsold
2013
#iami
$eat
2:3,2'0
1;',000
101,2'0
2013
$eat
#iami
2:2,'00
1',000
118,12'
201+
$eat
#iami
280,000
200,000
0,000
201+
#iami
$eat
210,000
1+0,000
10',000
&n year 201+, Heat sti"" o#es Miami from intercompany purchases made amounted to %12',000, #hi"e Miami sti"" o#es Heat from purchased made 201+ amounted to %;0,000( Inter-company sale of plant assets 7n January January 1, 2013, 2013, Miami so"d a ui"ding ui"ding to Heat Heat for %1,380,000 %1,380,000(( he cost of the ui"din ui"ding g #as %2,000,000 #ith 2' years usefu" "ife and accumu"ated depreciation of %800,000 on the date of sa"e( 7n Ju"y 1, 2013, Heat so"d "and purchased for %'00,000 t#o years ago to Miami for %'0,000( years from the date of sa"e( 7n Ju"y 1, 201+, Miami so"d Machinery101 to outsider for % %8,000( oth companies are using straight "ine method for depreciation( )dditiona" )dditiona" information information
&mpairment of good#i"" %200,000 year 2013 and %100,000 year 201+ Miami dec"ared di!idends of %200,000 in year 2013 and on the same year recei!ed di!idends from Heat of %80,000( %rior to conso"idation of Miami and Heat financia" statements, Miami #as gi!en information that Heat Heat met a"" the cond conditi ition on for conti conting ngen entt "iai" "iai"iti ities es agree agreed d durin during g acquis acquisiti ition on #ith #ith the o"d o"d stockho stockho"der "ders( s( Miami Miami #ith the minority minority stockho" stockho"ders ders of Heat Company Company agreed agreed to sett"e sett"e a"" contingencies this year 201+( )cquisition )cquisition costs are sti"" unsett"ed unsett"ed y year year end 201+( 201+(
he indi!idua" financia" statements for these t#o companies as of *ecemer 31, 201+ are as fo""o#s$
Ans%er t&e follo%ing' "nder Full (ood%ill Quiz ) *anuary ), 20)3 1( 2(
4usidiary 9e 9et as assets at at fa fair !a !a"ue 6ood#i"" attriuta"e to %arent
3( +( '( :(
6ood#i"" at attriuta"e to 9C& Conso"idated Co Common st stock Conso"idated %a %aid in in ca capita" =total) = total) Conso"idated etained earnings
(
Conso"idated 4t 4tockho"ders 5q 5quity
Quiz 2 + At ecem-er 3), 20)3 in .re.aration of consolidated financial statement, determine t&e follo%ing accounts 1( Conso"idated net income 2( 9C& in in the net income of 4u 4usidiary 3( +(
Cons Conso" o"id idat ated ed net net inc incom ome e att attri riu uta ta" "e e to to par paren entt 6ood#i"" after impairment "oss
'( :(
ota" ota" net net ad?us ad?ustme tment nt on on %"an %"antt )sset )sset for for con conso" so"ida idated ted a"an a"ance ce 4he 4heet et =at =at gros gross>( s>( ota" ota" net net ad?us ad?ustme tment nt on on )ccum )ccumu" u"ate ated d *epre *eprecia ciatio tion n for for conso conso"id "idate ated d a"an a"ance ce 4he 4heet et((
( 8(
Common 4tock %aid in capita" = total)
;( 10( 10(
etained 5arnings 9C& 9C& in in the the net net asse assets ts of 4us 4usid idia iary ry
Quiz 3 – At ecem-er 3), 20)/ in .re.aration of consolidated financial statement, determine t&e follo%ing accounts 1( 6ain on sa"es of "and - in the consolidated income statement 2( 6ain@="oss> on on sa sa"e of of ma machinery - in the consolidated income statement 3( 4a"es +( '(
Cost of goods so"d 7perating e.penses
:( ( 8( ;(
9et income 9et in income attriuta"e to to parent 9et in income attriuta"e to to 9C& etained 5arnings
10( 11(
Common stock %aid in Capita" = total)
12( 13( 1+( 1+( 1'( 1'(
9C& in in th the ne net as asset set of of 4u 4usid sidiary iary Conso"i so"id dated o ota" ta" )sset sets Cons Conso" o"id idat ated ed ota" ota" ia iai" i"it itie ies s Cons Conso" o"id idat ated ed 4toc 4tockh kho" o"de der’ r’s s 5qu 5quit ity y
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