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MrMuchimi
3 years ago
14

A parent company exchanges 30,000 shares of its $1 par value common stock, with a market value of $10/share, for all of the shar

es owned by the subsidiary's shareholders, resulting in a $300,000 total purchase price. On the acquisition date, the subsidiary reported a book value of Stockholders' Equity of $225,000, comprised of $90,000 of Common Stock and $135,000 of Retained Earnings. An examination of the subsidiary's balance sheet revealed that book values were equal to fair values for all assets except for PPE (net), which has a book value of $120,000 and a fair value of $195,000.
Required:
Prepare the entry that the parent makes to record the investment.
Business
1 answer:
Ivan3 years ago
8 0

Answer:

Common Stock $90,000 (debit)

Retained Earnings $135,000 (debit)

Revaluation Reserve $75,000 debit)

Investment in Subsidiary $300,000 (credit)

Explanation:

The Parent (Investor) acquires the Assets and Liabilities (or Equity) of the Subsidiary (Investee) at their Acquisition date fair values.

Any excess of the Purchase Consideration over the Net Assets/ Equity taken over is known as Goodwill and is shown in the Consolidated financial Statements of the Group.

The above shows the elimination journal entry that would be prepared at the acquisition date. The Revaluation reserve has been created to adjust the fair value of PPE. There is no goodwill.

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Vaselesa [24]

Answer:

to assist the low income at a cost to society, in convenient, affordable housing.

Explanation:

Rent control can be defined as a process which typically involves keeping the cost of rent within a certain amount that is affordable for the citizens. Therefore, it ensures the amount of money spent as rent doesn't go above the chosen amount or grow at an increased rate.

Price control can be defined as standard restrictions or regulatory conditions that are typically set and enforced by the government of a country.

This ultimately implies that, price controls are used to impose the minimum and maximum prices set by the government, which are to be charged for various goods and services in the market. This minimum price that can be charged such as minimum wage is known as price floor while the maximum price that can be charged such as rent control is known as price ceiling.

Basically, rent control is considered to be a price ceiling.

Hence, the usual stated political goal of rent control is to assist the low income at a cost to society, in convenient, affordable housing.

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3 years ago
Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of 3.50 percent, a par value of $1,000 pe
katrin [286]

Answer:

2.9652%

Explanation:

to determine the cost of debt we must use the FMV of the bonds plus the YTM:

first bond:

FMV = 1.09 x $1,000 = $1,090 x 3,600 bonds = $3,924,000

YTM = {C + [(F - P)/n]} / [(F + P)/2] = {17.5 + [(1000 - 1090)/16]} / [(1000 + 1090)/2] = (17.5 - 5.625) / 1045 = 1.136% x 2 = 2.27% annual

second bond:

FMV = 0.95 x $2,000 = $1,900 x 3,950 bonds = $7,505,000

YTM = {C + [(F - P)/n]} / [(F + P)/2] = {59.4 + [(2000 - 1900)/42]} / [(2000 + 1900)/2] = (59.4 + 2.38) / 1950 = 3.168% x 2 = 6.34% annual

total debt = $3,924,000 + $7,505,000 = $11,429,000

weighted average after tax cost of debt:

{($3,924,000/$11,429,000 x 2.27%) + ($7,505,000/$11,429,000 x 6.34%)} x (1 - 0.40) = (0.779% + 4.163%) x 0.6 = 4.942% x 0.6 = 2.9652%

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The correct answer is B. Accounting firms are prohibited from providing many types of consulting services to the companies they audit.

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The main reason for this policy is that it does not allow conflicts of interest to arise that eventually produce widely known cases of fraud, such as those presented at the Enron and Worldcom companies.

The Enron case broke out in the U.S. when that energy giant announced what was once the biggest bankruptcy in the history of the country, with a debt of 31,000 million dollars, something overcome a few months later by the collapse of another colossus, WorldCom.

In June 2002 WorldCom, the second US telephone. and of the world, he admitted that he had lied in his accounting books for almost 4,000 million dollars and his actions - which shortly before touched his maximum of 16 dollars - collapsed to 20 cents. His bankruptcy exceeded Enron's: $ 35 billion of liabilities.

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