Homework Answers
Dear Student,
In parent's books, assets and liabilities are recorded at fair value. The difference between consideration payable / paid by parent company and fair value of net assets are taken into Goodwill when parent pays more than fair value of net assets. If company pays less for fair value of net assets then it is called bargain gain which is taken in Profit or loss statement / Income statement. I am replying as per IFRS. But head of accounts should be same. Secondly previously bargain gain was taken into Capital Reserve but it is not credited after amendments in accounting rules.
| Journal Entries in Parent Books | |||||
| No. | Date | Dr. /Cr. | Account Title |
Debit (in USD) |
Credit (in USD) |
| Case A | Dr. | Current Assets | 20,000.00 | ||
| Dr. | Long Term Assets | 1,30,000.00 | |||
| Dr. | Goodwil (Balancing Figure) | 30,000.00 | |||
| Cr. | Liabilities | 30,000.00 | |||
| Cr. | Parent Company | 1,50,000.00 | |||
| Case B | Dr. | Current Assets | 30,000.00 | ||
| Dr. | Long Term Assets | 80,000.00 | |||
| Dr. | Goodwil (Balancing Figure) | 40,000.00 | |||
| Cr. | Liabilities | 20,000.00 | |||
| Cr. | Parent Company | 1,30,000.00 | |||
| Case C | Dr. | Current Assets | 40,000.00 | ||
| Dr. | Long Term Assets | 60,000.00 | |||
| Cr. | Liabilities | 60,000.00 | |||
| Cr. | Profit on acquisition (Balancing Figure) | 15,000.00 | |||
| Cr. | Parent Company | 25,000.00 | |||
Dear Student in Case C, you can credit "Profit or Loss Account" imstead of "Profit on acquisition"
I made you concept clear. Request you to like. Thanks.
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value.
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Current assets
$
29,000
Current liabilities
$
6,200
Net fixed assets
34,100
Long-term debt
10,400
Equity
46,500
Total
$
63,100
Total
$
63,100
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Current assets
$
5,700
Current liabilities
$
3,200
Net fixed assets
10,000
Long-term debt
2,500
Equity
10,000
Total
$
15,700
Total
$
15,700
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versus the $10,000 book value shown. Jurion pays...
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value.
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Current assets
$
29,000
Current liabilities
$
6,200
Net fixed assets
34,100
Long-term debt
10,400
Equity
46,500
Total
$
63,100
Total
$
63,100
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Current assets
$
5,700
Current liabilities
$
3,200
Net fixed assets
10,000
Long-term debt
2,500
Equity
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Total
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