Question
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
|
(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.)
ces.)
INA | FVE | ||
Current ratio | |||
Debt to equity ratio | |||
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