Advanced Financial Accounting

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  1. Baskin Corporation pays $ 420,000 for Camlin Inc. and that the estimated FMV of Assets, Liabilities and Equity are as follows:       (1 Mark)

Account Receivable                 100,000

Inventory                                 50,000

PP & E                                     200,000

Total Assets                             350,000

          Liabilities                                 70,000

          Retained Earnings                    80,000

          Common Stock                        200,000

          Liabilities & Equities               350,000

          Determine the amount of Goodwill.

2.  Zaid Ltd and Zafar Ltd agreed to merge on January 1, 2019. On the date of the merger agreement, the companies reported the following data:  (2 Marks)

  Balance SheetZaid LtdZafar Ltd
Book ValueFair ValueBook ValueFair Value
Current Assets190,000240,00050,00062,000
Long Term Assets600,000  500,000  300,000  275,000
Accumulated Depreciation(130,000) (50,000) 
                          Total Assets660,000740,000300,000337,000
     
Current Liabilities100,000120,00075,00075,000
Common Stock300,000 50,000 
Capital in excess of Par Value40,000 10,000 
Retained Earnings220,000 165,000 
                      Total Liabilities660,000 300,000 

Zaid Ltd has 15,000 shares of its $20 par value shares outstanding on January 1, 20X3, and Zafar Ltd has 10,000 shares of $5 par value stock outstanding. The market values of the shares are $400 and $75, respectively.

Required:

Zaid Ltd issues 1,000 shares of stock in exchange for all of Zafar Ltd’s net assets. Prepare a balance sheet for the combined entity immediately following the merger.

Solution:     

3.   From the Given information Calculate the Book Value and pass Elimination entry:                                                                                               (2 Marks)

  1. PQR Ltd  owns 75% of STV Ltd.
  2. STV Ltd ’s net income for 20X4 is SAR 250,000
  3. PQR Ltd’s net income for 20X4 from its own separate operations is SAR 500,000.
  4. STV Ltd’s declares dividends of SAR 36,000 during 20X4. 
  5. STV Ltd has 20,000 shares of $5 par stock outstanding that were originally issued at $15 per share. 
  6. STV Ltd’s beginning balance in Retained Earnings for 20X4 is SAR 150,000
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