Colton Jones Inc. Essay

Marion Jones was once the repair sh areholder and president of Chempla, Inc. in 20X1 she exchange her inception to Westcoat Industries. She signed an balance to be a consultant for five forms. subsequently being un equal to make a profit Westcoat decided to sell their raise in Chempla, but were unable to beget a buyer. Westcoat offered Chempla back to Marion Jones and an compact was reached on September 1, 20X4.Included in the chinkment Marion would be majority shareholder of the risingly formed corporation. A purchase price was frame for the net assets and commercialize value of key outs receivable, inventories, property, plant, and equipment, and accounts collectible were obtained. Marion Jones with other investors was able to pay the encyclopaedism of Chemplas net assets. Colton Jones, Inca doped LIFO basis of accounting.Under the U.S. generally accepted accounting principles Codification of get across Standards, Codification point 805 Business Combination s Colton Jones accounted for the science of Chempla as they should take a shit. The scholarship system was exercisingd as it should flummox been, one entity was identified as the claimr, an acquisition date was stated, and the recognition and measurement principals are present. All parts of the acquisition that indispensable to take place were present in the side.11 GAAP Codification of Accounting Standards, Codification Topic 805 Business Combinations Prestone, Riles, & angstrom unit Nye AssociatesPrestone, Riles, & Nye (as required) is a marketing communications company with offices throughout the US and a subsidiary in the United terra firma and they want to expand into Eastern Europe. In their efforts to do so PRN entered an agreement to arrogate outstanding stress of Broadwick Communications, Inc., a firm with contacts in Europe. Brodwick has three shareholders owning 25% each and eight owning the remaining 25%. PRN is responsible to pay $14 million to Broadwick shareholders and form a new entity, BPRN International, Inc. BPRN pull up stakes conduct the activities of Broadwick and entrust have two classes of melodic line, coarse A, pick out and Common B, non right to vote job. Income distributions or losses pass on be shared with the monomania of Common B shares. BPRN bequeath issue 48 pctage of its voting form to PRN and 52  per centum to the former Broadwick shareholders. PRN plans to enforce the fair play regularity to account for and discipline its coronation BPRN.PRNs conclusiveness to use the justness method is support by APB 18 The Equity manner of Accounting for Investments in Common Stock, which states, that the lawfulness method of accounting for an investing in car park credit line should also be followed by an investor whose investment in voting stock gives it the competency to exercise evidential influence everywhere operating and pecuniary policies of an investee even though the investor holds 50 per centum or slight of the voting stock an investment (direct or indirect) of 20 pct or to a greater extent of the voting stock of an investee should lead to a presumption that in the absence of evidence to the contrary an investor has the ability to exercise significant influence over an investee.1 PRNs investment in BPRN meets these criteria.The reason for employ the fair play method is to accurately report PRNs share of net income from BPRN and for PRNs investment account to smoothen its share of BPRNs net assets. We agree with PRNs decision to account for and report its investment in BPRN using the equity method since it meets the requirements of GAAP as stated higher up. PRN also plans to acquire a majority of the voting stock in BPRN, at which time it will become a subsidiary of PRN. Since the prefatory accounting procedures for applying the equity method are the same in each case PRN will be able to continue using the equity method if and when it acquires a majority of the voting stock and is required to prepare unify financial statements1 APB Opinion No. 18, carve up 17.Stanomat, Inc.Stanomat, Inc. plans to acquire the outstanding commonality stock of Kesser Instruments and make it a subsidiary. An agreement is make that allows Stanomat to acquire 55 percent in two months and will purchase additive shares and outstanding shares will be purchased over a four division period. Stanomat will issue a note to Kesser payable over four years for $20 million with matter to 1.5 percent above prime. During the period of the note Stanomat will acquire unissued shares of Kesser and upon complete defrayal of the note Stanomat will own 100 percent of the subsidiary. At 55 percent of ownership, Stanomat will write down its investment at 100 percent ownership.We do not believe it is distinguish for Stanomat to demo its investment in Kesser establish on the 100 percent ownership that it has committed to purchase. Stanomat will use the equity method to account for its investment in Kesser and prepare consolidated financial statements since it owns more than 50 percent of the company. However, in separate to accurately reflect its share of Kessers assets and income, it should and record and report the grammatical constituent that it is entitled to. FASB Statement 141R requires an merchant bank to live the assets acquired, the liabilities assumed, and any non imperious amour in the acquiree at the acquisition date.1 Therefore Stanomat moldiness fleck the noncontrolling evoke held by Kesser until much(prenominal) time as it has acquired 100 percent ownership.In business combinations contingent shares are shares that will only be issued down the stairs certain(a) circumstances or when certain conditions are met. A predetermined set of events must occur before the shares would be issued to investors. In this case, shares of Kesser stock will only be issued to Stanomat when a payment has been made. Deferred payment shares ar e issued to the investors in advance of payment. If the Kesser had issued its shares to Stanomat in advance of payment, Stanomat would be able to report and record the investment based on the 100 percent of shares it had received.If Stanomat records the investment in Kesser at the 55 percent direct it would not be appropriate or practical to treat the purchase as a step acquisition. Step acquisition is only necessary when the investor owns a noncontrolling interest in the investee and then acquires additional interest giving it significant influence. In a business combination achieved in stages, the acquirer shall remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if any, in earnings.2 Stanomat will acquire a controlling interest in Kesser in the first gear transfer of stock. Therefore it will be using the equity method to record the investment. Upon acquiring additional shares there will be no need to slump its investment accounts.1 FASB Statement 141R unofficial2 FASB Statement 141R paragraph 48genus Falco Industries, Inc.Falco, a supplier of self-propelling parts, sells its parts to aftermarket segments of the auto industry, including the manufacturer, rebuilder, warehouse distributor, chew merchandiser, and specialist. Falco acquired 10 percent voting common stock in an automotive store, cleanly Automotive, and in the same year acquired an additional 12 percent. Falco has a June 30 fiscal year and Tidy has a year end of October 31st. At year-end Falco Industries wanted to use the equity method to account for the investment in Tidy Automotive Stores. The market value of the investment in common stock on June 30th was 6 percent less that its acquisition cost.During the year Falco acquired a total of 22 percent of outstanding common stock in Tidy, which gives Falco between 20 and 50 percent of outstanding common stock, and therefore Falcos interest in Tidy is signif icant. To account for this theatrical role of investment, Falco would need to use the equity method. The interest in Tidy would not be significant if Falco had acquired less that 20 percent, in this case Falco would need to use the cost method to account for the investment. If Falco had acquired more than 50 percent they would have to issue consolidated financial statements.