On January 1, 2019 Prism Ltd. purchased 90% of Solstice Co. at a cost of $225,000.

On this date, Solstices shareholders equity was as follows: Common shares (10,000) $100,000 Retained earnings 110,000 $210,000

The book values of all of Solstices net assets were equal to fair market value, except for specialized equipment, which was undervalued by $40,000

The equipment had an estimated useful life of 5 years

On July 1, 2019, Solstice issued an additional 2,000 shares for $75,000. Prism did not acquire any of these shares.

On October 1, 2019 Solstices share price had fallen to $30 per share. Prism purchased 1,000 shares at this price on the open market.

On December 31, 2019 Solstice reports a net income of $40,000 (earned evenly throughout the year) and declared dividends of $10,000

REQUIRED:

a) Prepare an acquisition differential schedule for 2019 showing the controlling and non controlling interests share of the changes occurring throughout the year.

b) Calculate the equity method balance in the investment in Solstice account as at December 31, 2019. Clearly show all calculations for impact of ownership changes.