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
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:
...
