Advanced Accounting
Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 1, Problem 6E
To determine

Introduction: Acquisition is a corporate term used to represent purchase of another company and gaining the ownership of the company.

To provide: Amount of goodwill and deferred tax liability

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You work for an accountancy firm. You have been asked to provide advice to clients about the following transactions:On 1 October 2022, Shikipisha, a listed company, purchased 90% of the ordinary shares of Allan. Allan, which ceased trading one week prior to the share purchase, owns a manufacturing facility comprising of land and buildings as well as related equipment.The fair value of the land and buildings is similar to the fair value of the equipment. The acquisition of Allan only gained legal approval on the basis that all employees who worked at the facility are retained. There are no other assets, including any inventories, or processes transferred as part of the sale.Shikipisha proposes to account for the purchase of Allan as a business combination.Required:Advise whether the proposed treatments of the above two transactions are in accordance with IFS Standards.
Internet Corporation is considering the acquisition of Homepage Corporation and has obtained the following audited condensed balance sheet: Internet and Homepage agree on a price of $280,000 for Homepage's net assets. Prepare the necessary journal entry to record the purchase given the following: Internet issues its $5 par value stock as consideration. The fair value of the stock at the acquisition date is $50 per share. Additionally, Internet incurs $5,000 of security issuance costs.
Puncho Company is acquiring the net assets of Semos Company in exchange for common stock valued at $900,000. The Semos identifiable net assets have book and fair values of $400,000 and $800,000, respectively. Compare accounting for the acquisition (including assignment of the price paid) by Puncho with accounting for the sale by Semos.
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