Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

LO1 45. Effects of qualifying as a business on asset acquisitions Assume on January 1, 2019 an investor company paid $2,250 to an investee company

image text in transcribedimage text in transcribed

LO1 45. Effects of qualifying as a business on asset acquisitions Assume on January 1, 2019 an investor company paid $2,250 to an investee company in exchange for the following assets and liabilities transferred from the investee company: Investee's Book Value Asset (Liability) Estimated Fair Value $ 300 1,500 Production equipment Factory ... Land. Patents $ 240 1,200 600 360 100 0 In addition, the investor provided to the seller contingent consideration with a fair value of $200 and the investor paid an additional $50 of transaction costs to an unaffiliated third party. The contingent consideration has a potential settlement value of $450 in two years, and is not a derivative financial instrument. The book values are from the investee's financial records immediately before the exchange. The fair values are measured in accordance with FASB ASC 820: Fair Value Measurement. Parts a. and b. are independent of each other. a. Provide the journal entry recorded by the investor company assuming that the net assets transferred from the investee do not qualify as a business," as that term is defined in FASB ASC Master Glossary. b. Provide the journal entry recorded by the investor company assuming that the net assets transferred from the investee qualify as a business," as that term is defined in FASB ASC Master Glossary

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Horngrens Cost Accounting A Managerial Emphasis

Authors: Srikant Datar, Madhav Rajan

16th Global Edition

1292211547, 9781292211541

Students also viewed these Accounting questions