B326

LuLW9. 0 0 - - - - - - Font Paragraph Styles Instructions: This examination consists of four compulsory questions. Read each question carefully and make sure that you understand it before you begin answering In questions that require calculations, credit will be given for showing your detailed workings. It's imperative that you write your answer using your own words. Plagiarism will be penalized depending on its severity and according to AoU plagiarism policy. Question 1 (30 marks) A Explain what is meant by Goodwill Impairment Test, and identify the main five events upon which goodwill undergoes a test for its impairment. Provide your answer in light of your study of the course subjects and your readings through the internet and/or the university e-library. (10 Marks) B- light of your study of the course subjects and your readings through the Duternet and/or the university e-library. Provide examples from the real world for successful and unsuccessful mergers and acquisitions cases in recent years and state the specific reasons behind their success or failure (Do not provide general reasons behind success or failure & only one example should be provided for each case) (10 marks) C. What are the differences between Merger, Consolidation, and Acquisitions? Support your answer with one example from the mal world for each type. Provide your war in light of your sidy of the course subjects and your readinga through the Internet and/or the new e-library. (10 Marks) Page 1 of 3 ISH (UNITED STATES) Question 2 (25 marks) In January 1, 2017 Parent Company has acquired 75% of Subsidiary for $975,000. On the date of the acquisition the subsidiary had retained earnings $291,000 anda capital of $827,000. Separate balance sheets as of 1 January 2017 for Parent and its subsidiary are as follows: Description Parent Cash Receivable Land Property Investment in Subsidiary Total asset 22,500 30,000 390,000 750,000 975,000 2,167,500 Subsidiary at fair value value 135,500 135,500 70,000 70,000 200,000 250,000 750.000 801,000 - 1,155,500 27,500 8,000 Account payable Other liabilities Capital stock Retained earnings Total equity and liabilities 12,500 62,500 1,900,000 192,500 2,167,500 30,000 7,500 8 27,000 291.000 1,155,500 Required: 1. Prepare the journal entry on parent's books to account for the investment in subsidiary (13 marks 2. Prepare the required elimination entries as of January 1, 2017. Show your computation for Excel fair value over book value and Goodwill. (17.5 marks) 3. Prepare a consolidated balance sheet for Parent and Subsidiary as of January 1, 2017. (6 marks ITED STATES A E AL A A A Aay. A AaBbCct AaBbCcDc AaBbCcDc AaBb C AaBbCcL Heading 5 1 Normal 1 No Spac... Heading 1 Heading 2 E . 9. Paragraph Styles Question 3 (10 marks) Panorama Corporation acquired 80% of Scann Corporation shares on January 1, 2019 for $1,400,000 cash. when Scann's stockholders equity was $1,250,000. On that date, the book value of Scann's assets and liabilities was equal to the fair value except for equipment that had a book value of $105,000 and fair value of $150,000 and had a remaining useful life of 5 years from January 1, 2019. Any other excess would be assigned to goodwill. The separate net income of Panorama Corporation and Scann Corporation for the year ended December 31, 2019 was $180,000 and $120,000 respectively. Required: 1. Calculate the excess of Fair value over book value at January 1, 2019. 2. Calculate the amount of goodwill on the consolidated balance sheet at January 1, 2019. 3. Calculate the amount of equipment on the consolidated balance sheet at January 1, 2019. 4. Calculate the consolidated net income for the year ended December 31, 2019. (10 marks) Page 2 of 3 Paragraph Styles Question 4 (35 marks) Par Corporation acquired a 70 percent interest in Sol Corporation's common stock on January 1, 2011, for $490,000 cash. The stockholders' equity of Sol on this date consisted of $500,000 capital stock and $100,000 retained earnings. The difference between the fair value of Sol and the underlying equity acquired in Sol was assigned $5,000 to Sol's undervalued inventory, $14,000 to overvalued buldings. $21,000 to undervalued equipment, and remaining amount to goodwill The undervalued inventory items were sold during 2011, and the overvalued buldings and undervalued equipment had remaining efl lives of seven years and three years, respectively. Depreciation is straight line. At December 31, 2011, Sol's accounts payable indude $10,000 owed to Par. Separate financial statements for Par and Sol for 2011 rem inized as follows (in thousands): Par Combined Income and Retained Earnings Statements for the Year Ended December 31 Sales SO 5700 60.2 (400) (60) Income from Sol Gain on equipment Cost of sales Depreciation expense Other expenses Net income Add: Retained earnings January 1 Dedi: Dividends Retained earnings December (140) (MO) (155) (160) 255.2 300 (200) $ 352 100 (50) SIO Balance Sheetal December 31 Accounts receivable Dividends receivable Inventories Other current assets Buildings net Equipement Investment in Sol Total acts SINO $ 200 $85 100 os Accounts payable Dividends payable Other liabilities Capital stock, $10 par Retained earnings Total equities 500 1.000 355.2 $1,205 2 150 $850 Red Vang method. Prepare the required dimination entries on December 31, 2011 Show your