Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On December 31, Year 1, P Company purchased 90% of the outstanding shares of S Company for $8,100 cash. The statements of financial position of

On December 31, Year 1, P Company purchased 90% of the outstanding shares of S Company for $8,100 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) $ 8,800 $ 7,200 $ 6,200
Investment in S Company 8,100
Inventory 5,860 4,600 4,800
Accounts receivable 4,550 2,500 2,500
Cash 2,900 1,750 1,750
$ 30,210 $ 16,050
Ordinary shares $ 11,200 $ 3,700
Retained earnings 12,310 5,750
Long-term liabilities 3,500 2,700 2,700
Other current liabilities 1,900 2,500 2,500
Accounts payable 1,300 1,400 1,400
$ 30,210 $ 16,050

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

P Company
Consolidated Statement of financial position
December 31, Year 1
Assets
$0
Liabilities
Total liabilities $0
Shareholders' equity
0
$0

(ii) Fair value enterprise method

P Company
Consolidated Statement of financial position
December 31, Year 1
Assets
$0
Liabilities
Total liabilities $0
Shareholders' equity
0
$0

(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.)

ces.)

INA FVE
Current ratio
Debt to equity ratio

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Horngrens Cost Accounting A Managerial Emphasis

Authors: Srikant Datar, Madhav Rajan

17th Global Edition

129236307X, 9781292363073

More Books

Students also viewed these Accounting questions

Question

Draw a schematic diagram of I.C. engines and name the parts.

Answered: 1 week ago