Assignment Question(s): (Marks 5)
Q1. Assume the book value of Sub’s net assets is SR 1,000 and that the FMV of the net assets is SR 1,500 assume that the acquisition price was SR 2, 000 (1.0 mark)
Required: explain the three parts of the acquisition price.
Answer:
Q2. Contrast Push-Down Accounting VS Non-Push-Down Accounting. (1.0 mark)
Answer:
Q3. You are given the following transactions ((1.0 mark)
a. Parent purchased inventory for SR 300 and t sold the inventory to a Sub for SR 400 not yet sold to third party.
b. Parent purchased inventory for SR 300 and t sold the inventory to a Sub for SR 400 sold to third party.
c. Parent lent sub. A loan of SR 500
Required: Pass elimination entries for the intercompany transactions.
Answer:
Q4. ABC Corporation acquired a subsidiary paying 700 cash with no differential. Subsidiary’s Common stock SR 500; retained earnings SR 200, During Subsidiary’s first year of operations; it generated net income of SR 100 and paid dividends of SR 40. (2.0 marks)
Required:
a. Pass journal entries to update ABC’s investment account in Subsidiary.
b. Pass the basic elimination entry.
Answer: