QUESTION $2(15$ marks$)$

On January $1,2023$ Primrose Ltd$.$ purchased $90\%$ of Saffron Co$.$ at a cost of $$225,000.$ On this date,

Saffron's shareholders' equity was as follows:

$$210,{000}_{{?}_{?}}$

The book values of all of Saffron's 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 $1,2023,$ Saffron issued an additional $2,000$ shares for $$75,000.$ Primrose did not acquire

any of these shares.

On October $1,2023$ Saffron's share price had fallen to $$30$ per share. Primrose purchased $1,000$

shares at this price on the open market.

On December $31,2023$ Saffron 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 $2023$ showing the controlling and non controlling

interest's share of the changes occurring throughout the year. $(8$ marks$)$

b$)$ Calculate the equity method balance in the investment in Saffron account as at December $31,$

$(7$ marks$)$

Clearly show all calculations for impact of ownership changes.