Practice 2- Ch 2 Consolidation

Practice 2- Ch 2 Consolidation - 2-1 Ch 2: Consolidation...

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Unformatted text preview: 2-1 Ch 2: Consolidation Four Practice Problems:2-9, 2-18, 2-23 and 2-24Solutions: Problem 1: 2-Solution: B9 (10 minutes) (Investment account after 2 years with fair value option included) Consideration transferred (fair value) $800,000 Fair value of identifiableassets Cash $150,000 A/R 140,000 Software 320,000 In-process R&D 200,000 Liabilities (130,000Fair value of net identifiableassets acquired ) Goodwill $120,000680,000Problem 2: 2-18. (20 minutes) (Preparation of a consolidated balance sheet)*PINNACLE COMPANY AND CONSOLIDATED SUBSIDIARY STRATA Worksheet for a Consolidated Balance Sheet January 1, 2011 Cash 433,000 122,000 555,000 Pinnacle Strata Adjust. & Elim. ConsolidatedAccounts receivable 1,210,000 283,000 1,493,000 Inventory 1,235,000 350,000 1,585,000 Investment in Strata 3,200,000 0 (S) 2,600,000 (A) 600,000 0 Buildings (net) 5,572,000 1,845,000 (A) 300,000 7,717,000 Licensing agreements 0 3,000,000 (A) 100,000 2,900,000 Goodwill 350,000 (A) 400,000 Total assets 12,000,000 5,600,000 15,000,000 750,000 Accounts payable (300,000) (375,000) (675,000) Long-term debt (2,700,000) (2,625,000) (5,325,000) Common stock (3,000,000) (1,000,000) (S) 1,000,000 (3,000,000) APIC 0 (500,000) (S) 500,000 0 Retained earnings (6,000,000)(1,100,000)(S) 1,100,000 Total liab. & equities (12,000,000)(5,600,000)(15,000,000)(6,000,000)*Although this solution uses a worksheet to compute the consolidated amounts, the problem does not require it. Problem 3: 2-23 (30 Minutes) (Overview of the steps in applying the acquisition method when shares have been issued to create a combination. Part h. includes a bargain purchase.)a. The fair value of the consideration includes Fair value of stock issued...
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Practice 2- Ch 2 Consolidation - 2-1 Ch 2: Consolidation...

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