Melanie Limited (Melanie) has 120,000 shares of $1 par value share outstanding. On January 1, 2020, Lillian Company (Lillian) purchased 36,000 ordinary shares of Melanie for $558,000, allowing Lillian to influence Melanie significantly. On January 1, 2020, shareholders equity of Melanie included the following

share capital($1 par) 120,000

share premium 720,000

retained earning 460,000

Lillian recorded the investment in the investment in Melanie account in its book and used the

equity method to account for such investment. An appraisal made on January 1, 2020 determined that the book values of Melanies reported assets and liabilities appropriately reflected their fair values except for a building with a 12-year remaining life which was undervalued by $288,000.

During 2020, Melanie sold inventories to Lillian at a total price of $84,000, including a markup of 40%. 75% of the inventories were resold to third parties in 2020 and the remaining was resold in 2021. During 2021, Melanie sold inventories to Lillian at a total price of $105,000, including a markup of 40%. 70% of the inventories were resold to third parties in 2021, and the remaining was resold in 2022.

The following information is available for Melanie from 2020 to 2022

(a) Determine the implicit goodwill included in Lillians investment in Melanie on January 1, 2020.

(b) Prepare the necessary entries in Lillians book for 2020 in relation to its investment in Melanie.

(c) Show how the investment in Melanie is reported in Lillians financial statements for the year ended on December 31, 2021. And determine the difference in the statement of comprehensive income and the statement of financial position if instead the investment was accounted by using the fair value method (FVOCI).

On January 1, 2023, Lillian paid $1,387,000 to acquire an additional 74,400 ordinary shares of Melanie. After the further acquisition, Lillian obtained control power over Melanie. Melanie's shareholders equity accounts at that date include Share Capital ($1 Par), $120,000, Share Premium, $720,000, and Retained Earnings, $600,000. The book values of Melanies reported assets and liabilities appropriately reflected their fair values, except for a building with a 9-year remaining life which was undervalued by 216,000. Fair-value assessments were also conducted on that date and revealed the following:

fairvalue of Lillian's 30% previous ownership of Melanie is $576,000

fair value of Melanie's NCI is 153,600

Lillian continued to record this investment in the investment in Melanie account and changed to use the cost method in its book after obtaining the control.

(d) Determine the balance in the Investment in Melanie account in Lillians book just after the further acquisition on January 1, 2023.

(e) Determine the acquisition dates goodwill in Lillians investment in Melanie if full goodwill method was adopted.

\begin{tabular}{|r|r|r|r|r|} \hline Year & Net Income (\$) & Dividends (\$) & RetainedEarnings(atDecember31)($) & SharePrice(atDecember31)($/share) \\ \hline 2020 & 99,000 & 48,000 & 511,000 & 15.6 \\ \hline 2021 & 55,000 & & 566,000 & 15.8 \\ \hline 2022 & 77,000 & 43,000 & 600,000 & 16.0 \\ \hline \end{tabular}