Reference no: EM132964045

Question - Prime H Company has been expanding rapidly and is now an extremely diversified company for its size. It currently owns three companies with manufacturing facilities, two companies primarily in retail sales, a consumer finance company, and two natural gas pipeline companies. This has led to some conflict between the company's chief accountant and its treasurer. The treasurer advocates presenting no more than five assets and three liabilities on its balance sheet. The chief accountant has resisted combining balances from substantially different subsidiaries and has asked for your assistance. Research the Accounting Standards Codification to see what guidance is provided and prepare memo to the chief accountant with your findings. Include citations to and quotations from the most relevant references. Include in your memo at least two examples of situations in which it may be inappropriate to combine similar-appearing accounts of two subsidiaries. The President of the Magic Chemical Corporation had always desired its own yacht and team, which Magic Chemical concluded was intended to diversify its assets by acquiring an established lakeshore boatyard and repair facility near its summer home. He then might buy a boat and have a comfortable place to store it. Although never officially asking for the board to support this new undertaking, the chairman stepped on with confidence and with very considerable corporate funds to acquire full control of the boatyard, which each of the previous five years had lost very large amounts of money and never seen any benefit for the original shareholders. Not unexpectedly, after the acquisition by Magic Chemical, the boatyard started to lose money and each month the losses were growing. Magic Chemical, a very lucrative business for chemicals, posted total revenue of $780,000 for 20X2 and $850,000 for 20X3, including the net loss of $160,000 for 20X2 and $210,000 for 20X3 reported by the shipyard, which was merged in full. Chief accountant for Magic Chemical expresses alarm about his acknowledgement of inappropriate preparation of the combined accounts by the representatives of the board of directors of the firm or its owners. The President would not plan to warn anyone about the deficits that the Chief Accountant did not reveal in the consolidated revenue statement. You were requested to prepare the Chief Accountant memo indicating how subsidiaries need to be used in the combined declaration of profits and to include quotes or quotes from the Codification of Accounting Standards to help the Chief Accountable cope with this problem. In order to check whether reporting standards enable the boatyard to be disclosed on the financial reports or in management discussions and analyzes. You were even required to look into the accounts literature. On January 1, 20X2 the Pria Company acquired 30,000 of Sund's 100,000 outstanding stock shares for $180,000. The buying price was equivalent to the book value of the acquired shares. In Sund, the net profits for 20X2, 20X3 and 20X4 was recorded at $40,000, $30,000, and $5,000. In 20X2, it charged a $25,000 dividend, but no 20X3 and 20X4 dividends. In the course of December 31, 20X2, 20X3, and 20X4 compute the Pria Corporation sums should be recorded as the carrying values of its expenditure in Sund. What is the impact on the balance of the bank portfolio of a liquidating dividend under the expense system and the equity method? What is the equity way of receiving a dividend? By the form of cost? How does the reasonable valuation process vary in reporting revenue from non-subsidiary expenditure from the expense method and the equity system? How is the entirely changed equity approach different from the adapted stock method?