Question
On October 1, 2019 Preshafood Ltd. paid $337,500 for 75% of the issued and outstanding common shares of Sobeys Corp. The recorded assets and liabilities
On October 1, 2019 Preshafood Ltd. paid $337,500 for 75% of the issued and outstanding common shares
of Sobeys Corp. The recorded assets and liabilities of Sobeys Corp.
on October 1, 2019 were:
$ 90,000 125,000
400,000 35,000 $650,000
$ 85,000 115,000 200,000 250,000
$650,000
Cash Inventory Property and equipment
Accum. Amortization Goodwill
Total Assets
Current Liabilities Long Term Liabilities Common Shares Retained Earnings
$600,000 $200,000
Total Liabilities & Equity
On October 1, 2019, Sobeys Corp. inventory had a fair value of $130,000, and the property and equipment (net) had a fair value of $435,000 and Long Term Liabilities had a fair value of $118,000. The business combination agreement stated that if Sobeys earnings exceed $2.50 per share in the next 2 years an additional payment equal to $50,000 would be paid to Sobeys shareholders. An actuary valued this a as equivalent to $35,000 if paid at acquisition date.
REQUIRED:
-
a) Calculate the amount of goodwill resulting from the business combination using the entity theory (6 marks)
-
b) Calculate the non-controlling interest at acquisition date using the entity theory Fair Value Enterprise (FVE) (3 marks)
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