Reference no: EM132209365
TASK 1
Big Company acquired 75 percent of Little Company's stock at underlying book value on January 1, 20X8. At that date, the fair value of the non-controlling interest was equal to 25 percent of the book value of Little Company. Little Company reported shares outstanding of OMR350,000 and retained earnings of OMR 100,000. During 20X8, Little Company reported net income of $60,000 and paid dividends of OMR 3,000. In 20X9, Little Company reported net income of OMR 90,000 and paid dividends of OMR 15,000. The following transactions occurred between Big Company and Little Company in 20X8 and 20X9:
Little Co. sold equipment to Big Co. for a OMR 42,000 gain on December 31, 20X8. Little Co. had originally purchased the equipment for OMR 140,000 and it had a carrying value of OMR 28,000 on December 31, 20X8. At the time of the purchase, Big Co. estimated that the equipment still had a seven-year remaining useful life.
Big sold land costing OMR 90,000 to Old Company on June 28, 20X9, for OMR 110,000.
Required:
Give all eliminating entries needed to prepare a consolidation worksheet for 20X9 assuming that Big Co. uses the modified equity method to account for its investment in Old Company
TASK 2
Peanut Company acquired 75 percent of Snoopy Company's stock at underlying book value on January 1, 20X8. At that date, the fair value of the non-controlling interest was equal to 25 percent of the book value of Snoopy Company. Snoopy Company reported shares outstanding of OMR 350,000 and retained earnings of OMR 00,000. During 20X8, Snoopy Company reported net income of OMR 60,000 and paid dividends of OMR 3,000. In 20X9, Snoopy Company reported net income of OMR 90,000 and paid dividends of OMR 15,000. The following transactions occurred between Peanut Company and Snoopy Company in 20X8 and 20X9:
Snoopy Co. sold equipment to Peanut Co. for a OMR 42,000 gain on December 31, 20X8. Snoopy Co. had originally purchased the equipment for OMR 140,000 and it had a carrying value of OMR 28,000 on December 31, 20X8. At the time of the purchase, Peanut Co. estimated that the equipment still had a seven-year remaininguseful life.
Peanut sold land costing OMR 90,000 to Snoopy Company on June 28, 20X9, for OMR 110,000.
Required:
Give all eliminating entries needed to prepare a consolidation worksheet for 20X9 assuming that Peanut Co. uses the cost method to account for its investment in Snoopy Company.
TASK 3
The concept of different Forms of Business Combinationsreflects the approaches adopts to control the functioning and management of the acquired company. Below are given the different types of business combinations.
You are required to discuss the following with a suitable real time example either within the context of Oman industry or at the global level
• A statutory merger
• A statutory consolidation
• A stock acquisition
• Parent-subsidiary relationship