Question
Consolidation Accounting ABC Inc. purchased all of the outstanding common shares of XYZ Inc. for $100 million cash. At the time of the acquisition, the
Consolidation Accounting ABC Inc. purchased all of the outstanding common shares of XYZ Inc. for $100 million cash. At the time of the acquisition, the fair value of XYZ was $80 million.
Presented below are the condensed balance sheets for ABC and XYZ immediately prior to the acquisition:
(in millions)ABC Inc.XYZ Inc.
Assets$150$100
Liabilities$30$20
Shareholders equity12080
Total$150$100
Required
Prepare ABCs (a) unconsolidated balance sheet immediately after making the equity investment in XYZ and (b) the consolidated balance sheet immediately following the acquisition.
(a) Unconsolidated Balance Sheet
ABC Inc.
(in millions)
Investment in Equity Affiliate
Other assets
Total
Liabilities
Shareholders equity
Total
(b) Consolidated Balance Sheet
Use a negative sign with answers in the consolidating adjustments column to show an amount being removed (an eliminating entry).
ABC Inc. (in millions) XYZ, Inc. (in millions)Consolidating Adjustments (in millions)Consolidated ABC Inc. (in millions)
Investment in equity affiliates
Other assets
Goodwill
Total
Liabilities
Shareholders equity
Total
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Advanced Financial Accounting An International Approach
Authors: Jagdish Kothari, Elisabetta Barone
1st Edition
0273712748, 978-0273712749
