Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter SA2, Problem SA2.2.1P
To determine
Concept Introduction:
Business combination:
Business combination refers to the combining of one or more business organizations in a single entity. The business combination leads to the formation of combined financial statements. After business combination, the entities having separate control merges into one having control over all the assets and liabilities. Merging and acquisition are types of business combinations.
Consolidated financial statements:
The consolidated financial statements refer to the combined financial statements of the entities which are prepared at the year-end. The consolidated financial statements are prepared when one organization is either acquired by the other entity or two organizations merged to form the new entity. The consolidated financial statements serve the purpose of both the entities about financial information.
Variable interest entity:
A legal business structure is known as variable interest entity when an investor has interest which is controlled even when not have majority of voting rights. Commonly VIE activities includes leasing, financial assets, research and development, hedging financial instruments, and other arrangements transfers. Primary beneficiary is a term which is used to designate that party having control over VIE’s financial interest.
Prepare the determination and distribution of excess schedule.
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Intermediate accounting 1, Investments
4. On January 1, 20x1, ABC purchased bonds with face amount of P5,000,000. The entity paid P4,700,000 plus transaction cost of P42,130 for the bond investment. The business model of the entity in managing the financial asset is to collect contractual cash flows that are solely payment of principal and interest and also to sell the bonds the open market. The bonds mature on December 31, 20x3 and pays 6% interest annually on December 31 each year with 8% effective interest rate (after incorporating the transaction cost on initial recognition). The bonds are quoted at 106 and 108 on December 31, 20x1 and December 31, 20x2. The bonds are sold at 103 on July 1, 20x3, excluding accrued interest. Use 4-decimal present value factor.
The initial amount of the investment in bonds is (sample answer: 2,350,450)
In business combination, the fair value of
combinee bonds payable was $ 90,000 and
the carrying amount of bonds payable was $
110,000. The journal entry to allocate
liquidated company to identifiable assets and
liabilities with remainder to goodwill includes:
а.
Debit to discount on bonds payable $ 20,000.
b.
Credit to bonds payable $ 90,000.
С.
Debit to discount on bonds payable $
110,000.
d.
Debit to discount on bonds payable $ 90,000.
Needed in 10 minutes. Intermediate Accounting 1. Investments.
6. On January 1, 20x1, ABC purchased bonds with face amount of P5,000,000. The entity paid P4,700,000 plus transaction cost of P42,130 for the bond investment. The business model of the entity in managing the financial asset is to collect contractual cash flows that are solely payment of principal and interest and also to sell the bonds the open market. The bonds mature on December 31, 20x3 and pays 6% interest annually on December 31 each year with 8% effective interest rate (after incorporating the transaction cost on initial recognition). The bonds are quoted at 106 and 108 on December 31, 20x1 and December 31, 20x2. The bonds are sold at 103 on July 1, 20x3, excluding accrued interest. Use 4-decimal present value factor.
The carrying value of the investment in bonds on December 31, 20x2 is (sample answer: 2,350,450)
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- need in 10 minutes 3. On January 1, 20x1, ABC purchased bonds with face amount of P5,000,000. The entity paid P4,700,000 plus transaction cost of P42,130 for the bond investment. The business model of the entity in managing the financial asset is to collect contractual cash flows that are solely payment of principal and interest and also to sell the bonds the open market. The bonds mature on December 31, 20x3 and pays 6% interest annually on December 31 each year with 8% effective interest rate (after incorporating the transaction cost on initial recognition). The bonds are quoted at 106 and 108 on December 31, 20x1 and December 31, 20x2. The bonds are sold at 103 on July 1, 20x3, excluding accrued interest. Use 4-decimal present value factor. On December 31, 20x1, determine the impact to comprehensive income resulting from holding this investment. (sample answer: 2,350,450)arrow_forwardClient 7: The following data has been provided by your client, Hye Jin Corporation for their financial assets measured at FVOCI. On January 1, 2021, Hye Jin acquired P1,000,000, 10% bonds for P951,963. The principal is due on January 1, 2024 but interest is due annually every January 1. The effective interest rate is 12%. The bonds are measured at FVOCI. Information on fair values is as follows: December 31, 2021 98 December 31, 2022 103 13. How much is the value of the bonds on December 31, 2021? 14. Interest income recognized in 2022 15. Realized gain or loss from the investment in bonds on December 31, 2021 16. On January 1, 2023, Hye Jin sold all the bonds at 104. Calculate the gain on sale from the sale of bonds on January 1, 2023.arrow_forwardProblem 5-11 (AICPA Adapted) Glen Company had the following long-term debt: Sinking fund bonds, maturing in installments Industrial revenue bonds, maturing in installments Subordinated bonds, maturing on a single date 2,200,000 1,800,000 3,000,000 What is the total amount of serial bonds? a. 3,000,000 b. 4,000,000 c. 4,800,000 d. 7,000,000arrow_forward
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