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Advance Accounting Two Chapter One Part One: True or False

This document contains sample content from an accounting textbook, including: 1) Three parts - true/false questions, multiple choice, and practice exercises. The exercises involve recording business combinations and consolidating financial statements. 2) Sample journal entries are provided to record acquisitions using different payment amounts and contingent earn-out clauses. 3) A sample consolidated balance sheet for two companies, Zebra and Sawyer, is presented along with elimination entries and instructions for determining missing values. 4) Questions are provided about the differences between the parent company and economic unit concepts of consolidation.

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733 views

Advance Accounting Two Chapter One Part One: True or False

This document contains sample content from an accounting textbook, including: 1) Three parts - true/false questions, multiple choice, and practice exercises. The exercises involve recording business combinations and consolidating financial statements. 2) Sample journal entries are provided to record acquisitions using different payment amounts and contingent earn-out clauses. 3) A sample consolidated balance sheet for two companies, Zebra and Sawyer, is presented along with elimination entries and instructions for determining missing values. 4) Questions are provided about the differences between the parent company and economic unit concepts of consolidation.

Uploaded by

temedebere
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Advance accounting two

Chapter one

Part one: true or false

Instruction: indicate whether each of the statements below it is true or false.

1. True 2.True 3. False 4.True 5.True 6.True.

7. True 8.False 9.True 10.False

Part two: multiple choice items

Instruction: chose the correct answer from the alternatives provided and write the later of the
correct answer in the space provided.

1. A 2. C 3. C 4.B 5.C 6.A 7.C 8.A 9.C 10.A

Part three: workout items

Instruction: read the instruction in each part of the exercises and provide your answer
accordingly.

Exercise 1

Prepare journal entries for Derartu Corporation to record the business combination with
Genzebe Company.

1. Issuance of stock
Investment in Genzebe company……………………Br 750,000.
Common stock …………………………………………….Br 500,000.
Additional paid in capital ……………………………..Br 25,0000.
2. Direct additional cost of combination
Investment in combine’s net assets or common stock …………………….Br 90,000.
Stock issue cost ………………………………………………………………………………..Br 30,000
Cash ………………………………………………………………………Br 120,000.
3. Allocation of total investement cost
Total assets……………………………………………………………… Br 1,600,000
Good will ………………………………………………………………….Br 50,000.
Total liabilities …………………………………………………………Br 900,000.
Investment in genzebe company …………………………….Br 750,000.
Exercise 2
Answer the fallowing question using the given information.
A. How is the total cost of combine allocated in a purchase type business combination.
 Cost of combine is equal to net assets of script company.
Net asset of script company =total assets - total liablities
Br 1,600,000 –Br 100,000
=Br 1,500,000.
Cost of combine = Br 1,500,000
B. Assume post paid Br 1550000 in cash for script in the above transaction. Show the
journal entry which post would make to record the acquisition.
Investment in script company ……………………………….Br 1,500,000.
Discount on acquisition ……………………………………………Br 50,000.
Cash …………………………………………………………………………….Br 1,550,000.

C. Assume that post paid Br 1400000 in cash for script in the above transaction. Show the
journal entry which post would make to record the acquisition.
Investment in script company …………………………………..Br 1,500,000.
Discount on acquisition ………………………………………….Br 100,000
Cash ……………………………………………………………………….Br 1,400,000

D. Now assume post has paid Br 1,550,000 in cash for script’s net assets as part of the
agreement post agreed to pay the stockholders of script an additional Br 200000 in cash
if the post combination earnings of post averaged Br 1000000 or more per year over the
next three years. If the earning contingency is met ,what jornal entry will be required on
post book to required Br 200000 payment
Investment in script company ……………………………..Br 200,000
Cash………………………………………………………………………Br 200,000
E. Post has paid Br 1,400,000 in cash
Investment in script company…………………………………………… Br 200,000
Cash………………………………………………………………………...Br 200,000
Chapter two

Part one: multiple choices


Instruction: select the correct answer for each of the fallowing multiple choice
questions.
1. B 2.A 3.C 4.A 5.C 6. C 7.B 8. A 9.A 10.B 11. A
12.A 13.A 14.C 15.A

Part two: work out

Instruction: read the instruction in each part of the exercise and provide your answer neatly
and in good order.

Zebra Company and Sawyer Company

Consolidated balance sheet

May 31/2013

Assets Dr Cr
Inventory Br 100,000
Other current assets Br 250,000
Plant asset Br 400,000
Total assets Br 750,000
Liabilities and stock holders
Current liability Br 170,000
Bonds payable Br 104,000
Common stock Br 200,000
Additional paid in capital Br 116,000
Retain earning Br 160,000
Total liabilities and stock holders Br 750,000
Exercise 2

1. Determine the missing values in the elimination entry above.


B. Br 6,500
C. Br 12,800

2. The acquisition was stock acquisition.


3. Cost of acquisition Br48,000
4. Fare value of current asset=Br 34,000
Non-current asset=Br95,000)
Current liability=Br (20,000)
Non-current liability=Br (45,000)

Part three: easy question

1. No

2. Working paper for consolidated balance sheet


- Is containing separate balance sheet of the companies and elimination part and also
consolidate balance.
Consolidated balance sheet
- Is balance sheet of consolidate balance sheet of the company’s
- Is only contain consolidated balance sheet

3. Parent company concept


- The minority interest in net asset of subsidiary is treated as a liability.
Economic unit concept
- In this concept the minority interest in the subsidiary’ net assets is displayed in the
stock holders equity section of the consolidate balance sheet.
Advance accounting two assignment

Prepared by Mahlet lulu ID DRA/045/04

Submitted to Mr Takele Fufa

Date 11/04/2014

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