Business combination: Business combination refers tothe 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. : Impact of the dividend on the equity of the subsidiary and the investment account.

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Answer 1

Question

Chapter 8, Problem 1UTI

To determine

Business combination:

Business combination refers tothe 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.

:

Impact of the dividend on the equity of the subsidiary and the investment account.

Expert Solution & Answer

Explanation of Solution

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Retained earnings		500,000
	Common stock			10,000
	Paid in capital in excess of par			490,000
	(being the stock dividend recorded)

Table: (1)

The adjustment entry for the dividend is not required in the books of the subsidiary company as this transaction will not impact the equity of the subsidiary company. The parent will not make adjustment for the given transaction in its books of accounts. The equity of the subsidiary will not change in the consolidated statements. There is no requirement for any adjustment entry in the books of the parent company as there is no change in the total equity of the subsidiary when the investment in Company S is eliminated from consolidated financial statements. The revised holding is eliminated from accounts of parent company.

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Students have asked these similar questions

Problems 19 through 21 should be viewed as independent situations. They are based on the following data: Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. As of that date, Abernethy has the following trial balance: During 2017, Abernethy reported net income of $80,000 while declaring and paying dividends of $10,000. During 2018, Abernethy reported net income of $110,000 while declaring and paying dividends of $30,000. Assume that Chapman Company acquired Abernethy’s common stock for $490,000 in cash. As of January 1, 2017, Abernethy’s land had a fair value of $90,000, its buildings were valued at $160,000, and its equipment was appraised at $180,000. Chapman uses the equity method for this investment. Prepare consolidation worksheet entries for December 31, 2017, and December 31, 2018.

Pam Company paid $440,000 for an 80 percent interest in Sun Company on July 1, 2016, when Sun had total equity of $220,000. Sun Company reported earnings of $20,000 for 2016 and declared dividends of $32,000 on November 1, 2016. RequiredGive the entries to record these facts on the books of Pam Company: Assuming that Pam Company uses the cost method of accounting for its subsidiaries.Assuming that Pam Company uses the equity method of accounting for its subsidiaries. (Any difference between investment cost and book value acquired is to be assigned to equipment and amortized over a 10-year period.)

Problems 19 through 21 should be viewed as independent situations. They are based on the following data:Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. As of that date, Abernethy has the following trial balance:During 2017, Abernethy reported net income of $80,000 while declaring and paying dividends of $10,000. During 2018, Abernethy reported net income of $110,000 while declaring and paying dividends of $30,000.Assume that Chapman Company acquired Abernethy’s common stock by paying $520,000 in cash. All of Abernethy’s accounts are estimated to have a fair value approximately equal to present book values. Chapman uses the partial equity method to account for its investment. Prepare the consolidation worksheet entries for December 31, 2017, and December 31, 2018.

Answer 2

Question

Chapter 8, Problem 1UTI

To determine

Business combination:

Business combination refers tothe 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.

:

Impact of the dividend on the equity of the subsidiary and the investment account.

Expert Solution & Answer

Explanation of Solution

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Retained earnings		500,000
	Common stock			10,000
	Paid in capital in excess of par			490,000
	(being the stock dividend recorded)

Table: (1)

The adjustment entry for the dividend is not required in the books of the subsidiary company as this transaction will not impact the equity of the subsidiary company. The parent will not make adjustment for the given transaction in its books of accounts. The equity of the subsidiary will not change in the consolidated statements. There is no requirement for any adjustment entry in the books of the parent company as there is no change in the total equity of the subsidiary when the investment in Company S is eliminated from consolidated financial statements. The revised holding is eliminated from accounts of parent company.

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Answer 3

Question

Chapter 8, Problem 1UTI

To determine

Business combination:

Business combination refers tothe 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.

:

Impact of the dividend on the equity of the subsidiary and the investment account.

Expert Solution & Answer

Explanation of Solution

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Retained earnings		500,000
	Common stock			10,000
	Paid in capital in excess of par			490,000
	(being the stock dividend recorded)

Table: (1)

The adjustment entry for the dividend is not required in the books of the subsidiary company as this transaction will not impact the equity of the subsidiary company. The parent will not make adjustment for the given transaction in its books of accounts. The equity of the subsidiary will not change in the consolidated statements. There is no requirement for any adjustment entry in the books of the parent company as there is no change in the total equity of the subsidiary when the investment in Company S is eliminated from consolidated financial statements. The revised holding is eliminated from accounts of parent company.

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Answer 4

Question

Chapter 8, Problem 1UTI

To determine

Business combination:

Business combination refers tothe 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.

:

Impact of the dividend on the equity of the subsidiary and the investment account.

Expert Solution & Answer

Explanation of Solution

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Retained earnings		500,000
	Common stock			10,000
	Paid in capital in excess of par			490,000
	(being the stock dividend recorded)

Table: (1)

The adjustment entry for the dividend is not required in the books of the subsidiary company as this transaction will not impact the equity of the subsidiary company. The parent will not make adjustment for the given transaction in its books of accounts. The equity of the subsidiary will not change in the consolidated statements. There is no requirement for any adjustment entry in the books of the parent company as there is no change in the total equity of the subsidiary when the investment in Company S is eliminated from consolidated financial statements. The revised holding is eliminated from accounts of parent company.

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Answer 5

Chapter 8, Problem 1UTI

To determine

Business combination:

Business combination refers tothe 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.

:

Impact of the dividend on the equity of the subsidiary and the investment account.

Expert Solution & Answer

Explanation of Solution

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Retained earnings		500,000
	Common stock			10,000
	Paid in capital in excess of par			490,000
	(being the stock dividend recorded)

Table: (1)

The adjustment entry for the dividend is not required in the books of the subsidiary company as this transaction will not impact the equity of the subsidiary company. The parent will not make adjustment for the given transaction in its books of accounts. The equity of the subsidiary will not change in the consolidated statements. There is no requirement for any adjustment entry in the books of the parent company as there is no change in the total equity of the subsidiary when the investment in Company S is eliminated from consolidated financial statements. The revised holding is eliminated from accounts of parent company.

Answer 6

Chapter 8, Problem 1UTI

To determine

Business combination:

Business combination refers tothe 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.

:

Impact of the dividend on the equity of the subsidiary and the investment account.

Expert Solution & Answer

Explanation of Solution

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Retained earnings		500,000
	Common stock			10,000
	Paid in capital in excess of par			490,000
	(being the stock dividend recorded)

Table: (1)

The adjustment entry for the dividend is not required in the books of the subsidiary company as this transaction will not impact the equity of the subsidiary company. The parent will not make adjustment for the given transaction in its books of accounts. The equity of the subsidiary will not change in the consolidated statements. There is no requirement for any adjustment entry in the books of the parent company as there is no change in the total equity of the subsidiary when the investment in Company S is eliminated from consolidated financial statements. The revised holding is eliminated from accounts of parent company.

Answer 7

Chapter 8, Problem 1UTI

To determine

Business combination:

Business combination refers tothe 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.

:

Impact of the dividend on the equity of the subsidiary and the investment account.

Answer 8

Expert Solution & Answer

Explanation of Solution

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Retained earnings		500,000
	Common stock			10,000
	Paid in capital in excess of par			490,000
	(being the stock dividend recorded)

Table: (1)

The adjustment entry for the dividend is not required in the books of the subsidiary company as this transaction will not impact the equity of the subsidiary company. The parent will not make adjustment for the given transaction in its books of accounts. The equity of the subsidiary will not change in the consolidated statements. There is no requirement for any adjustment entry in the books of the parent company as there is no change in the total equity of the subsidiary when the investment in Company S is eliminated from consolidated financial statements. The revised holding is eliminated from accounts of parent company.