+ d Page T Insert Table Chart Text Shape Media Comment QUESTION 3 (20 Marks) (a) ABC123 Inc has decided to purchase 100% the voting shares of DEF456 for $400,000 in cash on July 1, 2019. On the date, the balance sheets of each of these companies were as follows: ABC123 Inc DEF456 Inc $900,000 $200,000 Cash and Short-Term Securities Inventory Plant and Equipment (net) Goodwill Total Assets $ 50,000 $350,000 S. $1,300,000 $120,000 $150,000 $ 80,000 $550,000 Current Liabilities $ 180,000 $160,000 Bonds Payable $400,000 $100,000 Common Shares $500,000 $200,000 Retained Earnings $220,000 $ 90,000 Total Liabilities and Equity $1,300,0001 $550,000 On that date, the fair values of DEF456 Assets and Liabilities were as follows Cash and Short-Term Securities Inventory Plant and Equipment (net) Current Liabilities 440 $200,000 $ 90,000) $250,000 $160,000 BLOOD T Insert Table Chart Text Shape Media Comment On that date, the fair values of DEF456 Assets and Liabilities were as follows: I Cash and Short-Term Securities Inventory Plant and Equipment (net) Current Liabilities Bonds Payable $200,000 $ 90,000 $250,000 $160,000 $ 88,000 I In addition to the above, an independent appraiser deemed that DEF456 Inc. had trademarks with a fair market value of $100,000 which had not been accounted for. In turn, ABC123's fair market values were equal to their book values with the exception of the Company's Inventory and Plant and Equipment, which were said to have Fair Market Values of $30,000 and $480,000, respectively. Based on the information provided: a) Calculate the amount of Goodwill arising from this combination. b) Prepare the journal entry to record ABC123's acquisition of DEF456's shares. c) Prepare ABC123's Consolidated Balance Sheet immediately following its acquisition of DEF123's voting shares. 2 #3 1,460 80 212 A $ 94 W E R 95 W 16 00 9 B 7 9 .8 T Y D 6 9 C Insert Table T Chart Text Shape Media Comment 2019 2020 Income (loss) before income taxes $100,000 ($60,000) Income tax expense (recovery) 40,000 (15,000) Net income (loss) $60,000 ($45,000) I Other comprehensive income (net of tax) 20,000 25,000 Comprehensive income (loss) $80,000 ($20,000) X purchased 40% of Y on January 1, 2019 for $400,000. Y paid dividends of $50,000 in each year. Y's income statements for 2019 and 2020 showed the following. At December 31, 2019, the fair value of the investment was $440,000 and at December 31, 2020 the fair value of the investment was $420,000. Required: Prepare X's journal entries for 2019 and 2020, assuming that this is a non-strategic investment and is accounted for at fair value through profit and loss (FVTPL) 1.440 # 3 928 224 98 " 19 $ %