Instructions: Prepare your solution to this assignment in Excel, and submit it using the Blackboard dropbox by the due date. Marks will be awarded for a reasonable attempt. Question 1 On April 1, 20X1, Alpha Inc. acquired 500,000 shares, representing 25% of the outstanding shares of Omega Corp at a price of $2 per share plus transaction costs of $10,000. The acquisition provided Alpha Inc. significant influence over Omega Corp. At this date, Omega Corp's assets and liabilities equaled book values except for inventory, which was overstated by $40,000 and equipment, which was understated by $100,000. Omega's shareholders' equity consisted of common shares, $1,300,000 and retained earnings. 2,450,000. On July 31, 20X1, Omega Corp declared and paid a dividend of $1.20 per share. Omega Corp's net income for 20X1 was $2,850,000, and was earned evenly during the year. Assume that the Omega's inventory from April 1 was sold by the year-end and that its equipment had a remaining life of 5 years on the date of acquisition. On March 31, 20X2, Alpha sold a patent with a book value of $65,000 to Omega for $125,000. The patent had a remaining life of 4.5 years at the date of sale. On July 31, 20X2, Omega Corp declared and paid a dividend of $1.30 per share. Omega Corp's net income for 20X1 was $3,050,000, and was earned evenly during the year. The income tax rate is 20% for both companies. Required: Assume that both Alpha and Omega prepare financial statements according to ASPE. Determine how Alpha should report its investment in Omega Corp. Provide specific references from the Handbook to support your recommendation. Discuss any choices that may be available. Assume that Alpha prepares its financial statements according to IFRS and decides to account for its investment in Omega under the equity method. Prepare the journal entries it would record for the years 20X1 and 20X2. Show supporting calculations. Question 2 On June 30, 20X1, Verne Limited (Veme) acquired a 30% interest in a joint venture company, Jules Corporation (Julee) for 400 Question 2 On June 30, 20X1, Verne Limited (Verne) acquired a 30% interest in a joint venture company, Jules Corporation (Jules) for $490,000. The shareholders' equity section of Jules consisted of common shares of $500,000 and retained earnings of $800,000. With the exception of a previously unrecorded patent with a fair value of $120,000 and a remaining useful life of 6 years, all assets and liabilities had fair values equal to their net book values. Additional information: . On May 1, 20X2, Verne sold equipment with a book value of $300,000 to Jules for $360,000. The equipment had a remaining useful life of 4 years on the date of sale. .In 20X3, Jules sold goods to Verne for $250,000 at a 30% gross profit margin. 65% of the goods were still in Verne's inventory at year end. In 20X4, Verne sold goods to Jules for $200,000 at a profit of $60,000. 45% of the goods were still in Jules's inventory at the end of the year. .Verne's goodwill in the investment in Jules had a recoverable amount of $30,000 at the end of 20X3. .Both companies have a 30% income tax rate, have a December 31, year end, and report under IFRS. Jules declared and paid a dividend of $160,000 on October 31, 20X4. Verne declared a dividend on $340,000 on December 15, 20X4, payable on January 5, 20X5. The statements of financial position and income statements for 20X4 are as follows for Verne and Jules: Statement of Financial Position December 31, 20X4 Verne Jules $ 180,000 $100,000 Cash Accounts receivable Inventory Plant and equipment (net) Land Investment in Jules (cost) Total assets 700,000 500,000 900,000 600,000 2.700,000 1.300.000 800,000 600,000 490.000 Q $5.770.000 $3.100.000 Current labe Long-term debt Ordinary shares Retained earnings $670,000 $ 300.000 1,000,000 900,000 1,000,000 500,000 3.100.000 1.400.000 Total abilities and shareholder's equity $5.770.000 $3.300.000 Sales Income Statement Year ended December 31, 20X4 Interest and other revenue Cost of goods sold Operating expenses Interest expense Income tax expense Net income Required: Verne Jules $11,200,000 $5,000,000 50,000 8,400,000 3.500.000 1,750,000 $50,000 100,000 50,000 300.000 150.000 $ 700.000 $ 350.000 Calculate the investment income that Verne Limited will roport related to ite Invertmont in Julee for the wor The statements of financial position and income statements for 20X4 are as follows for Verne and Jules: Cash Statement of Financial Position December 31, 20X4 Verne Jules $ 180,000 $100,000 Accounts receivable Inventory Plant and equipment (net) Land Investment in Jules (cost) Total assets Current liabilities Long-term debt 700,000 500,000 900,000 600,000 2,700,000 1,300,000 800,000 600,000 490,000 $5.770,000 $3.100.000 $670,000 $300,000 1,000,000 900,000 Ordinary shares Retained earnings 1,000,000 500,000 3,100,000 1,400,000 Total liabilities and shareholder's equity $5.770,000 $3.100.000 Sales Income Statement Year ended December 31, 20X4 Verne $11,200,000 $5,000,000 Jules Interest and other revenue 50,000 0 8,400,000 3,500,000 1,750,000 950,000 100,000 50,000 Cost of goods sold Operating expenses Interest expense Income tax expense Net income Required: 300.000 150.000 $ 700,000 $ 350,000 a) Calculate the investment income that Verne Limited will report related to its Investment in Jules for the year 20X4. Also calculate the balance of the Investment in Jules as at December 31, 20X4. Show supporting calculations. b) Prove your calculation of the balance of the Investment in Jules by calculating the balance at January 1, 20X4 and reconciling it to the year-end balance