On December 31, 20 18 , Big Company acquired all the capital stock of Little Company. Big acquired 79.2 million shares of Little s shares. Big issued 59 million shares of Big stock plus $30 for each share of Little stock. Big stock, which has a par value of $0.01 per share, had a market value of $32.25 per share. The estimated fair value of Little accounts were as follows: Cash and cash equivale nts $ 105,000,000 Receivables $ 141,000,000 Capitalized film costs $ 269,000,000 Intangible assets $ 3,140,000,000 Accounts payable $ (325,000,000) Other Liabilities $ (83,000,000) Deferred income tax liability $(1,121,000,000) Required: 1. Calculate the total price paid for Little . Is there goodwill or a gain on bargain purchases ? ( 3 point s ) 2. Record the acquisition assuming Little was dissolved (3 point s ) 5 Case 1.3 Huge Corporation acquires 5% of the outstanding voting shares of Tiny Corporation on January 1, 201 6 , for $100,000 when Tiny Corporation has a book value of $1,500,000. Despite the low percentage of ownership, Huge Corporation is able to exercise significant influence over Tiny , and therefore uses the equity method to account for the investment. An additional 30% of the stock i s purchased on January 1, 201 7 , for $651,000.

The following information is available for Tiny Corporation: 201 6 201 7 201 8 Net Income 700,000 750,000 900,000 Dividends 150,000 100,000 100,000 The Fair Value of Tiny Corporations stock at December 31, 201 6 was $2,170,000 . The book values of Tiny Corporations asset and liability accounts are considered as equal to fair values except for a Customer List whose value accounted for Huge Corporations excess cost in each purchase. The Customer List had a remaining life of 10 years at January 1, 201 6 . Required: 1. If Huge Corporation sells its entire investment in Tiny Corporation on January 1, 201 9 , for $1,300,000 cash, what is the impact on Huge Corporation s income? Show all your calculations ( 4 points) 2. Assume that Huge Corporation sell s inventory to Tiny Corporation during 201 7 and 201 8 as follow s: Cost to Huge Corporation Price to Tiny Corporation Year - End Balance (at transfer price) 201 7 35 ,000 50,000 20,000 (sold in following year) 201 8 33 ,000 60 ,000 40,000 (sold in following year) What amount of equity income should Huge recognize for the year 201 8 ? Show all your calculations (2 points) Annotations