Bank of Montreal (BMO) is Canada's fourth-largest bank. In 2011, it acquired a 100% interest in Marshall & Ilsley Corp., a mid-sized U.S. bank, for U.S. $4.1 billion.
Instructions
(a) BMO paid for this acquisition by issuing new BMO common shares to the current shareholders of Marshall & Illsley Corp. Prepare the journal entry that BMO made when it acquired Marshall & Ilsley Corp.
(b) When the acquisition was announced, the shares of BMO fell by over 6% while the shares of Marshall & Ilsley rose by 18%. Why do you think this happened?
(c) Will the investment in Marshall & Ilsley appear on BMO's consolidated statement of financial position? Why or why not?
(d) If BMO had purchased only 25% of Marshall & Ilsley for $1 billion and you found that the investment was being carried on the statement of financial position one year later at $1.1 billion, what would be the most likely reason for the increase in the investment account balance?