Overview
Often accounting situations are not straightforward. Sometimes the different options available today have repercussions for future options. It is important to be aware of the various accounting standards in order to make the best decisions and apply the best method based on the given circumstances.In this assignment, you’ll review a scenario outlining a partial acquisition of a new company and apply accounting methods based on the given situation. This assignment will help you complete Project Two, where you will analyze complex accounting situations in the context of a business transaction.
Scenario
You own a successful chocolate company and would like to expand your business and invest in an online candy company. You’ve found the perfect company, Online Confections of a Chocoholic. You have reviewed the 10-K report and financial statements. You are satisfied with this choice as an investment. Now, you must decide how much you want to invest in Online Confections of a Chocoholic. You have a choice to own as much as you want to invest.Once you have decided how much you want to own of Online Confections of a Chocoholic, go ahead and make the purchase. You’ll now have to think about journal entries and disclosure statements for your new online-based business.
Directions
Determine how much to invest in this new online candy company. Since this is a fictional company, there are no 10-K reports available. Therefore, you will have to decide on a fictional amount to invest. Use the accounting methods and principles from the Financial Accounting Standards Board (FASB) Accounting Standards Codification and Generally Accepted Accounting Principles (GAAP), linked in the Supporting Materials section, to apply the correct method to the given acquisition and to summarize basic journal entries based on the amount invested.Specifically, you must address the following rubric criteria:RationaleExplain the rationale for the accounting method that would be used to consolidate if you decided to acquire 20% or less of Online Confections of a Chocoholic.Explain the rationale for the accounting method that would be used to consolidate if you decided to acquire between 20% and 50% of Online Confections of a Chocoholic.Explain the rationale for the accounting method that would be used to consolidate if you decided to acquire more than 50% of the company.Journal EntriesSummarize the basic journal entries needed for the current period (at the time of investment) and end of year if 15%of Online Confections of a Chocoholic was purchased. Include the following details in your response:State the exact dollar amount of the investment.Note the accounts that should be used in the journal entries.Use debits and credits appropriately.Summarize the basic journal entries needed for the current period (at the time of investment) and end of year if 33.3% of Online Confections of a Chocoholic was purchased. Include the following details in your response:State the exact dollar amount of the investment.Note the accounts that should be used in the journal entries.Use debits and credits appropriately.Summarize the basic journal entries needed for the current period (at the time of investment) and end of year if 75% of Online Confections of a Chocoholic was purchased. Include the following details in your response:State the exact dollar amount of the investment.Note the accounts that should be used in the journal entries.Use debits and credits appropriately.Disclosure NotesExplain the types of information that would be included in Online Confections of a Chocoholic’s disclosure notes.
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