Question 1 (15 marks Co. X purchased 40% of the shares of Co. Y on January assets had a book value of S820000 Any acquisition differential on 100% of the net assets is to be allocated to Y's equipment, which had a 5-year remaining life, and a fair value greater than book value of $60,000 and to inventory, with a fair value greater than book value of $30,000. The inventory was sold 1, 2017, for $400,000. On that date, Y's total net Yin 2017. Y paid dividends of $32,000 in each year. Y's income statements for 2017 and 2018 showed the following: 2017 2018 $30,000 $10,000 $40,000 $200,000 Net Income before discontinued operation: Discontinued operation (net of tax) Net Income $260,000 Requirement 1: Prepare X's journal entries for 2017 only, assuming a significant influence investment. Requirement 2: (YOUR ANSWER MUST BE BRIEF) (USE POINT FORM) Identify 2 situations in which a share % holding of between 20% and 50% would not result in a significant influence investment. Question 2 (Amounts are small for test purposes) (25 marks) On Dec. 31, 2018, Parent Company (P) agreed to form a business combination with Sub Co (S). P issued 20 of its common shares for all 10 shares of S. This transaction increased the number of the outstanding shares of P from 80 to 100 shares. The market value of P shares was $20/share, and $40/share for s shares. The balance sheet for the two companies just prior to the acquisition were as follows: Prior to acquisition Book Value Book Value Fair Value $ 250 $ 100 $160 $190 Fair Value $ 200 $2.0 Indentifiable assets Goodwill Liabilities Owners' equity $200 0 $150 50 $80 $90 120 Question 2 (Continued) Required: . A. Prepare a calculation and al aatidn of the acquisition differential schedule under acquisition mthod Prepare a consolidated balance sheet at the date of acquisition under the acquisition You can use either the direct method approach or the worksheet approach. Use the provided B. Question 3 (Amounts are small for test purposes.) (45 marks Refer to the information in Question 2, except that instead of Parent Company issuing shares, purchased 80% (8 shares) of the shares (10 shares) of S by borrowing S320 from, the shareholders of S In the two week period both before and after the time of the purchase, Sub's shares were trading at an average price of S 36 per share. Prepare a 'calculation and allocation of the acquisition differential schedule under the acquisition method. (Be careful here!) A. B. Calculate the Non-Controlling Interest component. Show calculations C. Prepare a consolidated balance sheetat the date of acquisition under the acquisition method. D. Assume that the 2nd paragraph above, the paragraph starting with "In the two week period.. E. Calculate NCI and Goodwill (using the information in the problem above and req'ts' a, b, c) You can use either the direct method approach or the worksheet approach. was not in the information provided. Prepare a consolidated balance sheet at the date of acquisition under the acquisition method. Either method of preparation is acceptable under the following theory of consolidation: Parent Company Extension arks On December 31, 2015, P issued 20 of its common shares for all (10) of the outstanding common shares of Sub. In addition, P agreed to pay the shareholders of Sub an additional $100 on Jan. 10, 2018, itss share price exceeds $10 share on January 1, 2018 assigned a probability of 65% that Ss share price would indeed exceed $10 on that date. Puses a10%discount rate. The market value ofPshares on Dec 31, 2015, was $50/share. (1 year: .9091;2 yrs: 8264; 3 yrs:.7513) Required: Assuming that P does not change its estimates during 2016 and 2017, prepare all journal entries related to the agreement during 2015, 2016, 2017, and 2018 FMV of Sub's equipment, 510 Cost, $200 Acc dep'n, $140. Calculate the amounts on the consolidated statement balance sheet for Sub's portion of Equipment (cost) and Acc Dep'n using (aj net method, (b) proportionate method.