Question 2 (24 marks) 5$00,000 as part of the purchaie pricer on the belief that meat or all of these empleyeet would continue to weak for the company. aveement ancourded to $23,000 Required: manufacturing facility and are cratical to the sucress of the absove, hed Corp. attributed a value of 5100,000 to Sa's assembled workfocce. They huve the knowledige and skat to operate Sar's. Elfective on Augist 1, Year 3, the shareholders of Sax accepted an ofler fron Ded Cor would continue to woek for the campany. Pequired: a) Assume that Red made a $1,040,000 cash payment to the shareholders of Sax for 10006 af their shares. 1) Prepare the journal entry in the records of Red to record the share acquation 11) Prepare the consoldated balance sheet of Red Corp. as at August 1, Year 3. Explain the rationale for the accounting for the 5100,000 value attributed to Sari aniembled worblorte. to $11000 and were paid in cash. Red is identified as the acquirer. i) Prepare the journal entry in the records af Red to record the share acFuisition and related feet. ii) Prepare the consolidated balance sheet of Aled as at August 1 , Year 3. c) Assume the same facts as b) extept that Red is a privute company, uses ASPE, and chooves to use the cost, method to account for ats imvistment in Sax 1) Prepare the journal entry in the records of Red to record the share acquiation and related feet. ii) Prepure the balance sheet of Red as at Augint 1, Year 3. Question 2 (24 marks) 5$00,000 as part of the purchaie pricer on the belief that meat or all of these empleyeet would continue to weak for the company. aveement ancourded to $23,000 Required: manufacturing facility and are cratical to the sucress of the absove, hed Corp. attributed a value of 5100,000 to Sa's assembled workfocce. They huve the knowledige and skat to operate Sar's. Elfective on Augist 1, Year 3, the shareholders of Sax accepted an ofler fron Ded Cor would continue to woek for the campany. Pequired: a) Assume that Red made a $1,040,000 cash payment to the shareholders of Sax for 10006 af their shares. 1) Prepare the journal entry in the records of Red to record the share acquation 11) Prepare the consoldated balance sheet of Red Corp. as at August 1, Year 3. Explain the rationale for the accounting for the 5100,000 value attributed to Sari aniembled worblorte. to $11000 and were paid in cash. Red is identified as the acquirer. i) Prepare the journal entry in the records af Red to record the share acFuisition and related feet. ii) Prepare the consolidated balance sheet of Aled as at August 1 , Year 3. c) Assume the same facts as b) extept that Red is a privute company, uses ASPE, and chooves to use the cost, method to account for ats imvistment in Sax 1) Prepare the journal entry in the records of Red to record the share acquiation and related feet. ii) Prepure the balance sheet of Red as at Augint 1, Year 3
