Problem 5-9: How to determine the net book value at the date of acquisition?

CHAPTER 5 Consolidation Subsequent to Acquisition Date (D What is Cyrus's January 1, Year 5, retained earnings account balance assuming Curus a for its investment in Fazli using the 0) cost method? (li) equity method? (g) what is consolidated retained earnings at January Year 5 assuming C yrus accounts for its investment in Fazli using the (1) cost method? (ii) equity method? Problem 5-9 LO1, 2, 3 On July 1, Year 5 Big purchased 80% of the outstanding common shares of Little for $122,080 On that date, Little's equipment had a fair value that was $21,600 less than carrying amount. The equipment had accumulated depreciation of $20,000 and an estimated remaining useful life of 8 years. Also, at the date of acquisition, Little had an exclusive contract with the provincial government to perform periodic environmental audits of selected mining companies for the next five years. An independent business valuator indicated that a third other assets and liabilities had carrying amounts equal to fair values. On June 30, Year 6, goodwill had a recoverable amount of $20,000. party might pay up to $50,000 to take over this contract. All On June 30, Year 6, the following financial statements were prepared. Big uses the cost method to account for its investment. INCOME STATEMENTS Little $162,000 Big 270,000 10,800 280,800 140,100 31,080 171,180 $ 109,620 Sales investment income 162,000 44,380 28,200 122,580 39,420 Cost of sales Expenses (misc.) Net income RETAINED EARNINGS STATEMENTS $ 454,000 109,620 568,620 32,400 $536,220 s 32,400 39,420 71,820 13.500 $ 58,320 Balance, July 1 Net income Dividends Balance, June 30 BALANCE SHEETS At June 30, Year 6 835,940 162,000 (60,000) 122,080 $1,060,020 $ 253,800 270,000 536,220 $1,060,020 Miscellaneous assets Equipment Accumulated depreciation Investment in Little $128,820 5,600 (50,000) Liabilities Common shares Retained earnings $174,420 62,100 54,000 58,320 $174.420 309