Compare Arm’s Length Transactions vs Non-Arm’s Length Transactions and explain the necessity of eliminating intercompany transactions
- Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
1. On December 31, 2020, Parent company (A) acquired 80% of Subsidiary (B) outstanding common stocks for SR 368,000, Subsidiary’s fair value of net asserts was SR 460,000. During 2021, subsidiary net income and dividends declared were 100,000 and 50,000 respectively. Begging balance forAccumulated depreciation of subsidiary‘s equipment amounted to SR 50,000. Parent uses non-pushdown accounting and equity method .Subsidiary‘s fair value of net assets were as follows
|
Book Value Element |
Amount in SR |
||
|
Common Stock |
150,000 |
||
|
RetainedEarning |
120,000 |
||
|
Total |
270,000 |
||
|
Under –Or Over Valuation |
|||
|
Inventory |
(10,000) |
2 Months |
|
|
Land |
50,000 |
No Useful Life |
|
|
Equipment |
100,000 |
4 Years |
|
|
Total Under –Or Over Valuation |
140,000 |
||
|
Good Will |
50,000 |
No Useful Life |
|
|
Total Under –Or Over Valuation |
490,000 |
Required:
- Pass journal entries to record basic elimination entries.
- Pass journal entries to record the excess value reclassification entry
- Pass journal entries to record the amortized excess value reclassification entry
- .Pass journal entries to record the depreciation elimination entry if accumulated depreciation account based on book value of assets is 25,000.
Answer:
2. Compare Arm’s Length Transactions vs Non-Arm’s Length Transactions and explain the necessity of eliminating intercompany transactions
Collepals.com Plagiarism Free Papers
Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.
Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS
Why Hire Collepals.com writers to do your paper?
Quality- We are experienced and have access to ample research materials.
We write plagiarism Free Content
Confidential- We never share or sell your personal information to third parties.
Support-Chat with us today! We are always waiting to answer all your questions.
