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On December 31, Year 1, P Company obtains control over the net assets of S Company by purchasing 100% of the ordinary shares of S

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On December 31, Year 1, P Company obtains control over the net assets of S Company by purchasing 100% of the ordinary shares of S Company. P Company paid for the purchase by issuing ordinary shares with a fair value of $44,000. In addition, P Company paid $1,000 for professional fees to facilitate the transaction. The following information has been assembled just prior to the acquisition date: Required (a) Prepare a consolidated statement of financial position for P Company and calculate the debt-to-equity ratio immediately after the combination under e cel (i) the acquisition method (ii) the new-entity method (b) Which method shows the better solvency position? Briefly explain. (c) In your opinion, which method best reflects the true economic reality for the combined economic entity? Briefly explain

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