Posted: December 28th, 2022

ACC486 Advanced Accounting Comprehensive Problem Instruction: this problem tests knowledge

ACC486 Advanced AccountingComprehensive ProblemInstruction: this problem tests knowledge from all chapters of business combinations (consolidation). Theacquisition date data is given at the beginning of the problem. Then additional data is provided for eachindividual question/situation. Read carefully to identify which information actually applies to theparticular question. You are required to use the excel spreadsheet to finish this work. Your final productwill be one excel file with separate worksheets for each individual question. It is required for you touse the basic excel formula such as ‘=’, ‘=a1+a2’, etc., so the numbers carry forward automated to thefinal answers. Prepare your excel spreadsheet in a professional way that is easily understandable. I assign10 points to the appearance of your final product.Acquisition date data:Doone acquired 80 percent of Akron’s outstanding shares on January 1, 2013, in exchange for $369,000in cash. The subsidiary’s stockholders’ equity accounts totaled $353,000 and the noncontrolling interesthad a fair value of $92,250 on that day. However, a building (with a ten-year remaining life) in Akron’saccounting records was undervalued by $19,000. Doone assigned the rest of the excess fair value overbook value to Akron’s patented technology (five-year remaining life).1. Prepare schedules for acquisition-date fair-value allocations and amortizations for year 2013 forDoone’s investment in Akron (Question1).2. Akron reported net income from its own operations of $67,000 in 2013 and $83,000 in 2014. Akrondeclared dividends of $18,000 in 2013 and $22,000 in 2014. Doone applies the equity method forrecording its investment in the Akron. Given the above acquisition date data and the additionalinformation, show the calculation of ending balance of investment in Akron on Dec 31, 2014 and amountof equity in investee earnings for year 2014 for Doone (Question2)3. Given the above information at acquisition date and in Question 2, Akron also sells inventory toDoone as follows:Year201320142015Cost to Akron$ 72,00097,50087,500Transfer Priceto Doone$ 130,000150,000175,000Inventory Remainingat Year-End(at transfer price)$ 28,00040,50050,000At December 31, 2015, Doone owes Akron $19,000 for inventory acquired during the period.The following separate account balances are for these two companies for December 31, 2015. Note:Parentheses indicate a credit balance.Sales revenues and interest incomeCost of goods soldExpensesEquity in earnings of AkronNet incomeRetained earnings, 1/1/15Net income (above)Dividends declaredRetained earnings, 12/31/15Cash and receivablesInventoryInvestment in AkronLong-term Investment and PPE (net)Total assets$Doone(868,000)518,000185,700(59,540)$Akron(381,000)212,00064,0000$(223,840)$(105,000)$(494,000)(223,840)132,000$(284,000)(105,000)22,000$(585,840)$(367,000)$149,000270,000456,000967,000$101,000151,0000331,000$1,842,000$583,000LiabilitiesCommon stockRetained earnings, 12/31/15$(726,160)(530,000)(585,840)$(37,000)(179,000)(367,000)Total liabilities and equity$(1,842,000)$(583,000)What amounts make up the $59,540 equity earnings of Akron account balance for 2015 and what amountsmake up the $456,000 Investment in Akron account balance as of December 31, 2015? Show the detailedcalculation (Question3)Given the above data, prepare the complete consolidation worksheet to determine appropriate balancesfor external financial reporting as of December 31, 2015 (Question4)4. Doone sold Akron a building on January 2, 2014. It had cost Doone $100,000 but had $90,000 inaccumulated depreciation at the time of this transfer. The price was $25,000 in cash. At that time, thebuilding had a 5-year remaining life. Prepare the necessary consolidation entries related to intra-entitysale of building for year 2014 and year 2015 (Question5)5. On January1, 2014, Doone acquired on the open market bonds for $10,800 originally issued by Akron.This investment had an effective rate of 8%. The bonds had a face value of $10,000 and a cash interestrate of 9%. At the date of acquisition, these bonds were shown as liabilities by Akron with a book value of$8,400 (based on an effective rate of 11%). Prepare the necessary consolidation entries for these bonds onDecember 31, 2014 and December 31, 2015. You have to include the Akron’s bond issue amortizationschedule, Doone and Akron’s individual financial records, side by side comparison of effects of intraentity debt transaction, and consolidation entry for each year (Question6)

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