Advanced financial accounting baker 9th edition pdf

Even if corporate mergers are viewed favorably, however, the question arises as to whether the government, and ultimately the taxpayers, should be subsidizing those mergers through tax incentives. Many would argue that the desirability of individual corporate mergers, along with other types of investment opportunities, should be determined on the basis of the merits of the individual situations rather than through tax incentives.

Perhaps the most obvious incentive is to lower capital gains tax rates. Businesses may be more likely to invest in other companies if they can sell their ownership interests when it is convenient and pay lesser tax rates. Another alternative would include exempting certain types of intercorporate income. Favorable tax status might be given to investment in foreign companies through changes in tax treaties.

As an alternative, barriers might be raised to discourage foreign investment in United States, thereby increasing the opportunities for domestic firms to acquire ownership of other companies. In an ideal environment, the accounting and reporting for economic events would be accurate and timely and would not influence the economic decisions being reported.

Greater flexibility in determining which subsidiaries are to be consolidated, the way in which intercorporate income is calculated, the elimination of profits on intercompany transfers, or the process used in calculating earnings per share could impact such decisions. Goodwill is carried forward at the original amount without amortization, unless it becomes impaired. The amount determined to be goodwill in a business combination must be assigned to the reporting units of the acquiring entity that are expected to benefit from the synergies of the combination.

Goodwill assigned to each reporting unit must be tested for impairment annually and between the annual tests in the event circumstances arise that would lead to a possible decrease in the fair value of the reporting unit below its carrying amount [FASB , Par. As long as the fair value of the reporting unit is greater than its carrying value, goodwill is not considered to be impaired.

If the fair value is less than the carrying value, a second test must be performed. An impairment loss must be reported if the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill.

With the information provided, we do not know if there has been an impairment of the goodwill involved in the purchase of Common Corporation; however, Plush must follow the procedures outlined above in testing for impairment at December 31, 20X5.

C Risks Associated with Acquisitions Google discloses on page 21 of its Form K that it does not have significant experience acquiring companies. It also notes that most acquisitions the company has already completed have been small companies. The potential need to implement controls, procedures, and policies appropriate for a public company that were not already in place in the acquired company. Potential difficulties in integrating the accounting, management information, human resources, and other administrative systems.

The use of management time on acquisitions-related activities that may temporarily divert attention from operating activities. Potential difficulty in integrating the employees of an acquired company into the Google organization. Foreign acquisitions may include additional unique risks including potential difficulties arising from differences in cultures and languages, currencies, and from economic, political, and regulatory risks.

C Numbers Game a. A company is motivated to keep its stock price high. However, stock price is very sensitive to information about company performance. When the company reports lower earnings than the market anticipated, the stock price often falls significantly. A desire to increase reported earnings to meet the expectations of Wall Street may provide a company with incentives to manipulate earnings to achieve this goal. Accounting standards since that time have limited these earnings management techniques.

Levitt notes meaningful disclosure to investors about company performance is necessary for investors to trust and feel confident in the information they are using to make investing decisions. Levitt believes this trust is the bedrock of our financial markets and is required for the efficient functioning of U. He put together over five dozen acquisitions in the two decades prior to stepping down.

LDDS merged with Advanced Telecommunications Corporation in in an exchange of stock accounted for as a pooling of interests. In , the company merged with IDB Communications Group in an exchange of stock accounted for as a pooling. Later in , the company changed its name to WorldCom, Inc. This merger was accounted for as a purchase.

An attempt to acquire Sprint in , in a deal billed as the biggest in corporate history, was scuttled due to antitrust concerns. Continued deterioration of operations and cash flows and disclosure of a massive accounting fraud in June , led MCI WorldCom to file for bankruptcy protection in July , in the largest Chapter 11 case in U.

The company went through a period of retrenchment, and in early merged with Verizon Communications. Criminal charges were filed against Bernard Ebbers and five other former executives of WorldCom in connect with a major fraud investigation.

He was sentenced to 25 years in prison, with confiscation of nearly all of his assets. Since this time, Lehman Brothers and Washington Mutual have had bigger bankruptcy filings. C Leveraged Buyouts a. A leveraged buyout LBO involves acquiring a company in a transaction or series of planned transactions that include using a very high proportion of debt, often secured by the assets of the target company.

Normally, the investors acquire all of the stock or assets of the target company. A management buyout MBO occurs when the existing management of a company acquires all or most of the stock or assets of the company. The FASB has not dealt with leveraged buyouts in either current pronouncements or exposure drafts of proposed standards. Whether an LBO is a type of business combination is not clear and probably depends on the structure of the buyout.

Most LBOs are effected by establishing a holding company for the purpose of acquiring the assets or stock of the target company. Such a holding company has no substantive operations. Some would argue that a business combination can occur only if the acquiring company has substantive operations.

Thus, the question of whether an LBO is a business combination is unresolved. The primary issue in deciding the proper basis for an interest in a company acquired in an LBO, as determined by EITF , is whether the transaction has resulted in a change in control of the target company a new controlling shareholder group has been established.

If a change in control has not occurred, the transaction is treated as a recapitalization or restructuring, and a change in basis is not appropriate the previous basis carries over. If a change in control has occurred, a new basis of accounting may be appropriate. C Curtiss-Wright and Goodwill a. Curtiss-Wright Corporation acquired seven businesses in and six businesses in , with all of the acquisitions accounted for as purchases.

Goodwill represented This amount represents a substantially higher proportion of total assets than is found in most manufacturing-related companies. Note that the company accounted for all of its acquisitions using the purchase method, one of the two acceptable methods of accounting for business combinations during that time, and the method that resulted in the recognition of goodwill. The amount of goodwill at December 31, , represents about 26 percent of total assets. Curtis-Wright recognized no goodwill impairment losses for or At the end of , Curtis-Wright changed its date for testing goodwill impairment from July 31 to October This change had no effect on the financial statements for and prior years.

The management of Curtiss-Wright undoubtedly prefers the current treatment of goodwill. Curtiss-Wright has a large amount of goodwill in comparison with most companies, and amortizing that goodwill would have a negative impact on earnings. Despite the economic crisis of , Curtis-Wright had not recognized any goodwill impairment losses as of their annual report. Kmart declared Chapter 11 bankruptcy on January 22, The company reorganized and emerged from bankruptcy on May 6, The business combination was a stock acquisition in the form of a consolidation.

That is, a new corporation was formed to acquire the two combining companies, Kmart and Sears, Roebuck. After the combination, the parent company, Sears Holdings Corporation, held all of the stock of Sears, Roebuck and Co.

Kmart was designated as the acquiring company. Given that Kmart was considered to be the acquirer, the historical balances of its accounts became those of the parent company, Sears Holdings. E Asset Transfer to Subsidiary a. E Creation of New Subsidiary a. E Creation of Partnership a. E Reporting Goodwill a. E Balances Reported Following Combination a. Computation of goodwill Fair value of consideration given Fair value of assets acquired Fair value of liabilities assumed Fair value of net assets acquired Goodwill.

E Impairment of Goodwill a. E Assignment of Goodwill a. No impairment loss will be recognized. Reporting Unit C: No goodwill should be reported. E Goodwill Measurement a.

No goodwill will be reported. E Computation of Fair Value Amount paid Book value of assets Book value of liabilities Book value of net assets Adjustment for research and development costs Adjusted book value Fair value of patent rights Goodwill recorded Fair value increment of buildings and equipment Book value of buildings and equipment Fair value of buildings and equipment.

E Computation of Shares Issued and Goodwill a. Increase in par value and paid-in capital Divide by price per share Number of shares issued b. P Creation of New Subsidiary a. P Incomplete Data on Creation of Subsidiary a. No effect. The shares outstanding reported by Thumb Company are not affected by the creation of New Company. P Establishing a Partnership a. P Business Combination with Goodwill a. Fair value of assets at year-end Fair value of net assets at year-end Fair value of liabilities at year-end.

Required fair value of reporting unit: Fair value of assets at year-end Fair value of liabilities at year-end given Fair value of net assets at year-end Original goodwill balance Required fair value of reporting unit to avoid recognition of impairment of goodwill.

Total goodwill to be reported at year-end: Reporting unit A Reporting unit B Reporting unit C Total goodwill to be reported Computation of implied goodwill Reporting unit A Fair value of reporting unit Fair value of identifiable assets Fair value of accounts payable Fair value of net assets Implied goodwill at year-end.

Reporting unit B Fair value of reporting unit Fair value of identifiable assets Fair value of accounts payable Fair value of net assets Implied goodwill at year-end. Reporting unit C Fair value of reporting unit Fair value of identifiable assets Fair value of accounts payable Fair value of net assets Implied goodwill at year-end. P Purchase at More than Book Value a.

P Combined Balance Sheet a. P Incomplete Data Problem a. P Incomplete Data Following Purchase a. While this may seem like a tedious exercise and even though this is an advanced financial accounting text , we have found from our experience that students often forget the normal balance in different types of accounts and have trouble remembering whether a debit or credit entry increases or decreases different types of accounts.

Solution Manual Advanced Financial Accounting by Baker 9th The Twelfth Edition of Advanced Financial Accounting is an up-to-date, comprehensive, and highly illustrated four-color presentation of the accounting and reporting principles. Withdrawal or death of a partner b.

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Q The split-off and spin-off result in the same reduction of reported assets and liabilities. The number of shares outstanding remains unchanged in the case of a spin-off and retained earnings or paid-in capital is reduced. Shares of the parent are exchanged for shares of the subsidiary in a split-off, thereby reducing the outstanding shares of the parent company. Interaction of x rays with matter pdf raspberry pi assembly language raspbian beginners hands on guide pdf.

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