Financial Accounting Assignment 2

1700 words - 7 pages

Question 1

(a)

(i)

Cost of 80% Investment in Meagan Co

NCI: 20% of FV of Identifiable net assets

Identifiable assets and Liabilities(1000000+2000000)

Excess Fair Value over Carrying Amount(250000-350000)

Fair Value of identifiable net assets

Implied Value of 100% of Meagan Co

Carrying amount of Meagan Co

Calculation of Acquisition Differential:

3,000,000.00

3,000,000.00

(100,000.00)

2,900,000.00

Common Shares

Retained Earnings

1,000,000.00

2,000,000.00

Acquisition Differential

Allocated:

Inventory(250000-350000)

Goodwill


...view middle of the document...

00 $7,000.00 $13,000.00

Balance Dec 31, Yr 20X6 $100,000.00 $35,000.00 $65,000.00

60,000.00

80,000.00

52,000.00

140,000.00

225,000.00

-

-

225,000.00

21,000.00

28,000.00

49,000.00

78,750.00

-

78,750.00

39,000.00

91,000.00

146,250.00

146,250.00

(b)

Consolidated Statement of Financial Position for Ker Inc(Dec 31, 20X6):

(i)Property Plant and Equipment(net)(2200000+3500000-140000+20000)

(ii)Inventory(1400000+200000-225000)

(iii)Deferred Tax Liability(500000+300000-35000-78750)

(c )

Investment in Meagan Co, Dec 31, 20X6, Cost method 3,000,000.00

Meagan Co. Retained Earnings Dec 31, 20X6 3,000,000.00

Meagan Co. Retained Earnings at Acquisition Date 2,000,000.00

5,580,000.00

1,375,000.00

686,250.00

Investment Account, Dec 31, 20X6 - Equity Method

Increase in Retained Earnings of Meagan Co 1,000,000.00

Ker's % Ownership 80% 800,000.00

Less: NCI's Share of Acquisition Differential

(-100000x80%) (80,000.00)

Less: Meagans intercompany

profits(146250+65000)x80% 169,000.00

Investment in Meagan(Equity Method) 3,711,000.00

Question 2

(a)

Proprietary Theory

Calculation of Acquisition

Differential:

Cost of 72% Investment in S

Company 6,960

Carrying Amount of S Company's Net Assets

Assets 13,500

Liabilities 4,500

9,000

P Company's Ownership 72% 6,480

Acquisition Differential 480

Allocated: FV-CA %

Inventory 150 72% 108

Plant and Equipment (900) 72% (648) (540)

Goodwill 1,020

Non controlling Interest 0

Consolidate Statement of Financial Position

P Company

Dec 31, Year 1

Cash(1500+(72%x1050)) $2,256

Accounts Receivable(3150+(72%x1800)) $4,446

Inventory(5160+(72%x3750)+108) $7,968

Plant and Equipment(8100+(72%x6900)-648) $12,420

Goodwill $1,020

$28,110

Accounts Payable(600+(72%x700)) $1,104

Other Current Liabilities(1200+(72%x1800)) $2,496

Long-term liabilities(4200+(72%x2000)) $5,640

Shareholders Equity

Common Shares $10,500

Retained Earnings $8,370

$28,110

Parent Company Theory

Calculation of Acquisition Differential:

Cost of 72% Investment in S Company 6,960

Carrying Amount of S Company's Net Assets

Assets 13,500

Liabilities 4,500

9,000

P Company's Ownership 72% 6,480

Acquisition Differential 480

Allocated: FV-CA %

Inventory 150 72% 108

Plant and Equipment (900) 72% (648) (540)

Goodwill 1,020

Non Controlling Interest:

...

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