On January 1, 2017, Travers Company acquired 90 percent of Yarrow Company\'s out
ID: 2412145 • Letter: O
Question
On January 1, 2017, Travers Company acquired 90 percent of Yarrow Company's outstanding stock for $864,000. The 10 percent noncontrolling interest had an assessed fair value of $96,000 on that date. Any acquisition-date excess fair value over book value was attributed to an unrecorded customer list developed by Yarrow with a remaining life of 15 years.
On the same date, Yarrow acquired an 80 percent interest in Stookey Company for $472,000. At the acquisition date, the 20 percent noncontrolling interest fair value was $118,000. Any excess fair value was attributed to a fully amortized copyright that had a remaining life of 10 years. Although both investments are accounted for using the initial value method, neither Yarrow nor Stookey have distributed dividends since the acquisition date. Travers has a policy to declare and pay cash dividends each year equal to 40 percent of its separate company operating earnings. Reported income totals for 2017 follow:
Following are the 2018 financial statements for these three companies. Stookey has transferred numerous amounts of inventory to Yarrow since the takeover amounting to $112,000 (2017) and $140,000 (2018). These transactions include the same markup applicable to Stookey's outside sales. In each year, Yarrow carried 20 percent of this inventory into the succeeding year before disposing of it. An effective tax rate of 40 percent is applicable to all companies. All dividend declarations are paid in the same period.
Note: Parentheses indicate a credit balance.
Prepare the business combination's 2018 consolidation worksheet; ignore income tax effects.
Determine the amount of income tax for Travers and Yarrow on a consolidated tax return for 2018.
Determine the amount of Stookey's income tax on a separate tax return for 2018.
Based on the answers to requirements (b) and (c), what journal entry does this combination make to record 2018 income tax?
Prepare the business combination's 2018 consolidation worksheet; ignore income tax effects. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the Noncontrolling Interest and Consolidated Totals columns should be entered with a minus sign. Round your answers to nearest whole dollar amount. )
Travers Company $ 460,000 Yarrow Company 240,000 Stookey Company 184,000Explanation / Answer
This example demonstrates the steps in completing the accounting cycle to achieve successful financial reporting for your enterprise. These steps may vary based on your business processes and enterprise structure.
Scenario
Your company, InFusion Corporation, is a multinational conglomerate that operates in the United States (US) and the United Kingdom (UK). InFusion Corporation:
Uses Oracle Fusion General Ledger and all of the Oracle Fusion subledgers.
Includes all the components to build and maintain air quality monitoring (AQM) systems for homes and businesses in your business line.
Provides funding to your customers for the start up costs of these systems through your financial services organization.
Purchases raw materials from other countries, which requires you to record foreign currency transactions.
Consists of three subsidiaries.
InFusion Financial Services
InFusion UK Services
InFusion America
Consolidates financials with all its subsidiaries monthly in the parent, InFusion Corporation ledger.
The following are the tasks that your staff performs to complete the accounting cycle and ensure accurate capturing of your accounting transactions.
Open the accounting period.
Enter manual journal entries: standard, statistical, and intercompany balancing journal entries between your parent company and your three subsidiaries.
Import journals from your subledgers. Correct or delete journal entries that failed the import process. If necessary, run the import process again.
Define journals that occur periodically and allocation journal formulas for transactions that have a common format, require allocation of amounts or accounts to other accounts, or that are entered frequently.
Generate recurring and allocation journal batches based on your defined formulas.
Review the details of the unposted journal batches.
Edit unposted journals to change or correct information, including the batch period and the journal currency.
Post journal batches manually or automatically.
Check for posting errors. Use the Posting Execution Report and the Automatic Posting Execution Report to check the results of your posting. These reports are created automatically when the posting programs are completed.
Reverse posted journals as needed. Assign a reversing period to the journal, generate the journal, and post the reversing batch.
Note: Journals can be set to automatically reverse when you open the period. Subsequent adjustments to the accounts are then based on balances net of those reversals.
Revalue foreign currency denominated balances to reflect conversion rate fluctuations at the end of the accounting period.
Translate actual account balances in your UK subsidiary to US dollars to report to your US parent. You consolidate the ledgers for all your subsidiaries in US dollars.
Consolidate ledgers by defining and running a consolidation for all your subsidiaries.
Produce financial reports and perform online inquiries to review current account balances.
Close the current accounting period.
Open the next accounting period.