Question

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Course: Advanced Financial  Accounting

Q2. X Inc. acquired 100% of the outstanding common stock of Y Inc. for $250,000 cash and 20,000 shares of its own common stock ($5 par value), which was trading at $10 per share at the acquisition date. The estimated fair market values of assets, liabilities, and equity accounts of Y. Inc are as follows:

$200,000 Accounts Receivable $100,000 Inventory LT Marketable sec. 60,000 PP&E Total Assets Liabilities 50,000 Retained Eamings Common Stock 140,000 Total Liab/Equity

Require:

1. Calculate Acquisition cost of X.Inc
2. Calculate Good will of X.Inc
3. Pass journal entry in books of X. Inc

Q3. SALMAN Company acquires 60 percent of HAMAD Company’s common stock for $200,000 at the beginning of the year and gains significant influence over HAMAD. During the year, HAMAD has net income of $40,000 and pays dividends of $30,000.

Required: prepare the journal entries in books of SALMAN company under the Equity and Cost Method

Q4. From the Given information Calculate the Book Value and pass Basic Elimination entry :

1. PQR Ltd owns 100% of STV Ltd.
2. STV Ltd ’s net income for 20X4 is SAR 250,000
3. STV Ltd’s declares dividends of SAR 36,000 during 20X4.
4. STV Ltd has 20,000 shares of $5 par stock outstanding that were originally issued at $15 per share.
5. STV Ltd’s beginning balance in Retained Earnings for 20X4 is SAR 150,000

Q5. How are direct combination costs, contingent consideration, and a bargain purchase reflected in recording an acquisition transaction?

Answer 1

Answer of Question no - 4

Answer Of question no -4
Book Value
Common Stock = 20000 x 5	$ 1,00,000.00
+ additional paid in capital = 20000 x 10	$ 2,00,000.00
+Retained Earning	$ 1,50,000.00
+Net Income	$ 2,50,000.00
-Dividend	$ -36,000.00
Book Value	$ 6,64,000.00
Eliminating Entries
Common Stock (20000 x 15)	$ 3,00,000.00
Retained Earning	$ 3,64,000.00
Investment in QR Ltd		$ 6,64,000.00
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