Anna Lewis
Advanced Accounting
Seminar II
DQs
Chapter 2: 8
First Morgan Company will find the fair value of Jennings, Inc and the fair value of the stock shares. The excess if recorded as goodwill. Because dissolution will occur, Jennings’ asset and liability accounts are transferred to Morgan and entered at fair value with excess recorded to goodwill (Doupnik, Hoyle & Schaefer, 2011).
Chapter 2:9
A bargain purchase gain will be recognized when the asset is purchased at less than the fair value. The acquisition method records the identified assets acquired and liabilities assumed at their individual fair value. The net asset fair value effectively replaces the consideration transferred as the acquired firm’s valuation basis for financial reporting (Doupnik, Hoyle & Schaefer, 2011).
Chapter 3:2 a. Equipment. The parent book’s value plus the subsidiary’s book value less the fair value reduction allocation plus the current year expense reduction (Doupnik, Hoyle & Schaefer, 2011). b. Investment in Williams Company. The asset recorded by the parent is eliminated so that the subsidiary’s assets and liabilities can be included in the consolidated totals (Doupnik, Hoyle & Schaefer, 2011). c. Dividends paid. The parent company balance only because the subsidiary’s dividends were paid intra-entity to the parent, not an outside party (Doupnik, Hoyle & Schaefer, 2011). d. Goodwill. The residual allocation. Goodwill is not allocated (Doupnik, Hoyle & Schaefer, 2011). e. Revenues. The revenues of the parent and the subsidiary are added together (Doupnik, Hoyle & Schaefer, 2011). f. Expenses. The balances of the parent and subsidiary are added together along with any reduction to depreciation or amortizations (Doupnik, Hoyle & Schaefer, 2011). g. Common stock. The parent’s book value. Subsidiary shares are no