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Consolidated Financial Statements: Income Taxes, Cash Flows, and Installment Acquisitions
McGraw-Hill/Irwin
Income Taxes Attributable to Current Fair Values of a Combinees Identifiable Net Assets
A business combination requiring a revaluation of the combinees identifiable assets under financial accounting may result in the following: Meet the requirements for a tax-free corporate reorganization under the Internal Revenue Code. A new income tax basis may not be required. A temporary difference may result between provisions for depreciation and amortization in the financial statements and income tax returns. 3
Illustration
ABC Corp sold goods worth $12000 to its subsidiary Sub Corp at a gross profit of 20% of sales. The following journal entry will be passed for elimination of working paper: Intercompany Sales ABC 12000 Intercompany Cost of Goods sold - ABC 9600 Cost of Goods Sold Sub 1600 Inventories Sub 800
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Installment acquisitions require application of accounting standards applicable to influenced investees and controlled subsidiaries.
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