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On December 31, Year 1, P Company purchased 80% of the outstanding shares of S Company for $6,960 cash. The statements of financial position of

On December 31, Year 1, P Company purchased 80% of the outstanding shares of S Company for $6,960 cash.

The statements of financial position of the two companies immediately after the acquisition transaction appear below.

P Company S Company
Carrying Amount Carrying Amount Fair Value
Plant and equipment (net) $ 8,100 $ 6,900 $ 6,000
Investment in S Company 6,960
Inventory 5,160 3,750 3,900
Accounts receivable 3,150 1,800 1,800
Cash 1,500 1,050 1,050
$ 24,870 $ 13,500
Ordinary shares $ 10,500 $ 3,000
Retained earnings 8,370 6,000
Long-term liabilities 4,200 2,000 2,000
Other current liabilities 1,200 1,800 1,800
Accounts payable 600 700 700
$ 24,870 $ 13,500

Required:

(a) Calculate consolidated goodwill at the date of acquisition under the proportionate consolidation method.

Consolidated goodwill $

(b) Prepare a consolidated statement of financial position in order of liquidity i.e starting with cash at the date of acquisition under each of the following:

(i) Identifiable net assets method

(ii) Fair value enterprise method

(c) Calculate the current ratio and debt-to-equity ratio for P Company under the identifiable net assets (INA) method and the fair value enterprise (FVE) method. (Round "Current ratio" answers to 2 decimal places and "Debt to equity ratio" answers to 4 decimal places.)

INA FVE
Current ratio
Debt to equity ratio

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