Question 3: (17 marks) Pan Inc. purchased 80% of Spa's common shares for $250,000 on December 31, Year 5. Pan and Spa Inc. had the following balance sheets on December 31, Year 5 prior to the purchase: Cash Pan Spa Fair Value $310,000 $65,000 $65,000 Accounts Receivable $50,000 $59,000 $62,000 Inventory $40,000 $60,000 $65,000 Plant and Equipment (net) $300,000 $250,000 $210,000 Trademark $33,000 $23,000 Total Assets $700,000 $467,000 Accounts Payable Bonds Payable $150,000 $115,000 $115,000 $390,000 $207,000 $210,000 Common Shares $120,000 $85,000 Retained Earnings $40,000 $60,000 Total Liabilities and Equity $700,000 $467,000 Required: a) Prepare the journal entry to record the purchase of Spa's common shares on December 31, Year 5 b) Prepare calculation and allocation of acquisition differential schedule. Prepare the consolidated balance sheet (in good format) c) Calculate goodwill and non-controlling interest on the consolidated balance sheet on December 31, Year 5 under the Identifiable Net Assets/parent company extension theory. Hints: Goodwill - $212,500; Consolidated balance sheet total assets $1,087,500 Parent owns less than 100% hence assume FVE/entity method and calculate the implied value. Prepare the Calculation and Allocation of Acquisition Differential schedule in good format (as per text and lecture questions). Show all the FVIS separately (do not group). Include Non-controlling interest (write out) on the Consolidated Balance Sheet in the proper location. You must show the calculation for full marks. There are NO plug #s (nothing to balance) Good format: include proper title with proper dates (3 lines) Write out ALL account names on the Consolidated Balance Sheet If you use WORD, then type out the #s in brackets beside the account name on the cons. BS If you use Excel: I can see the #s in your cell so no need to type out the #s in brackets too. Template: 100% of the CV of Parent + 100% of the CV of Sub +/- 100% of the FVIS+ 100% goodwill. DO NOT add the fair values (FVs) of the Sub. You must separate the FVs (CV +/- FVI)