Solve the case using incomplete equity method not equity method
Case 3:
In 1/1/2019 comp...
Business, 01.01.2021 21:10 karenjunior
Solve the case using incomplete equity method not equity method
Case 3:
In 1/1/2019 company A purchased 75% of company B outstanding share capital cash of 25000 $, and it issued 50.000 shares for investment. The book value of issued shares is 6$, and market value is 15$. And it paid 4000$ cash as a commission and 8000$ auditing and legal expenses for combination.
Company A used purchase method to account for investment in company B and
used incomplete equity method to address the change of investment
account
Below are the financial statements of A and B companies before investment.
Account
Cash Receivables Inventory Equipment Cars Total assets Payable Share capital Additional paid-in eapita Retained Earnings
Total
The financial statement of parent and subsidiary at 31/12/2019 reported as follow:
Income statements at 31/12/2019
A company 800000
(650000)
150000 (25000)
125000 28125 153125
Retained earnings at 31/12/2019 A company 13000 153125 (130000) 36125
SFP on 31/12/2019 A company 123000
165000 175000 18750 784375
80000
30000
1376125 35000 130000 650000
525000 36125 1376125
B company 10000
60000 (25000) 45000
B company 44000 85000
48000
85000
13000
Sales Cost of goods sold Gross profit
Managerial Net profit
and sales expenses
Investment Year net profit
Retained earning 1/1 Year profits or losses Dividends Retained earnings 31/12
Cash Receivables Inventory Prepaid dividends Investment in company B Equipment's, net
Cars
Total assets Payable Accrued dividends Share capital Additional paid in capital Retained earnings Total liabilities and equity
profit in subsidiary
Company A
190000 130000
180000 100000 60000 660000
210000 350000 75000 25000 660000
Company B book value fair value 120000 80000 50000 800XXO 90000
60000 45000
60000
215000
65000 120XX00
20000
215000
200XX)
B company 150000 (80000)
70000 (10000)
60000
275000
65000
18750
120000
20000 45000 275000
The following are additional information related to subsidiary company:
1- Remaining age of Equipment that are in the subsidiary company at date of acquisition (1/1/2019) 2- At the year of 2019, 75% of inventory have been sold. And remaining inventory have been sold on 2020,
is 4 years.
3- Remaining age of Cars that are in the subsidiary company at date of acquisition (1/1/2019) is 4 years.
Requirement:
1- Prepare the consolidated financial statement at the date of acquisition
2- Prepare acquisition
the consolidate financial statements for the year of
Answers: 3
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