Please see the attachment. Please prove your answers with calculations/description.
Question 1 For a significant influence (SI) investment, which of the following is the most complete list of what investors are allowed to do? 1. 1. Exercise significant influence over the strategic operating decisions of the investee. 2 Exercise significant influence over investee's financial activities. . 3 Own less than 20% of the voting power of the investee. . 4 Exercise significant influence over the operating and financing policy decisions . of the investee. 0.4 points Question 2 Parent Co. acquires Sub Co.'s ordinary shares for cash. On the date of acquisition, Sub Co. includes goodwill of $100,000 on its statement of financial position. Which of the following statements regarding Sub Co.'s goodwill on the date of acquisition is correct? 1. 1. Sub Co.'s goodwill is considered an identifiable asset and should therefore be included in the acquisition differential calculation. 2 Sub Co.'s goodwill is considered an identifiable asset and should therefore be . excluded from the acquisition differential calculation. 3 Sub Co.'s goodwill is not considered an identifiable asset and is written off . against shareholders' equity of the subsidiary in the acquisition differential calculation. 4 Sub Co.'s goodwill is considered an identifiable asset and is written off against . the retained earnings of the subsidiary in the acquisition differential calculation. 0.4 points Question 3 Parent Ltd. and Sub Inc. statements of financial position as at December 31, 20X2, were as follows: 1. Parent Ltd. Sub Inc. Current assets $60,000 $10,000 Fixed assets (net) 100,000 60,000 Total assets 160,000 70,000 42,000 35,000 Bonds payable 100,000 12,000 Ordinary shares 10,000 12,000 8,000 11,000 Current liabilities Retained earnings Total liabilities and equity $160,000 $70,000 On January 1, 20X3, Parent Ltd. purchased all of Sub Inc.'s ordinary shares for $40,000 in cash. On that date, Sub Inc.'s current assets and fixed assets were worth $26,000 and $54,000, respectively. Assuming that consolidated financial statements were prepared on that date, answer the following: 2. What is the amount of goodwill arising from this business combination? 3. 1. ($40,000) 2 $7,000 . 3 $12,000 . 4 $17,000 . 0.4 points Question 4 How is negative goodwill treated under the acquisition method? 1. 1. The acquiring company will report a gain on acquisition. 2 . 3 . 4 . The acquiring company will report a loss on acquisition. The negative goodwill will be included in other comprehensive income, as it is essentially an unrealized gain. The negative goodwill is prorated using the fair values of the acquired company's net assets. 0.4 points Question 5 Errant Inc. purchased 100% of the outstanding voting shares of Grub Inc. for $200,000 on January 1, 20X4. Goodwill is tested annually for impairment. The statements of financial position of both companies, as well as Grub Inc.'s fair market values on the date of acquisition, are disclosed below: 1. January 1, 20X4 Errant Inc. Grub Inc. Fair value Cash $120,000 $76,000 $76,000 Accounts receivable 80,000 40,000 40,000 Inventory 60,000 34,000 50,000 400,000 80,000 70,000 - 70,000 84,000 Total assets 660,000 300,000 Current liabilities 180,000 80,000 80,000 Bonds payable 320,000 60,000 64,000 Ordinary shares 90,000 100,000 Equipment (net) Trademark Retained earnings Total liabilities and equity 70,000 60,000 $660,000 $300,000 An impairment test conducted on December 31, 20X4, revealed that the goodwill should actually have a value of $20,000. What is the carrying value of goodwill on Errant Inc.'s consolidated statement of financial position as at December 31, 20X4? 1. $20,000 asset 2 $20,000 liability . 3 $24,000 asset
