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Year 2017 2018 Poultrade Ino. is a US-based company trading FMCG (Fast Moving Consumer Goods). In 2017, the board of directors of Poultrade decided to enter into new markets by engaging in several business combinations Subsequent to this decision, Poultrade purchased shares in three companies in 2016. The companies are Mandalas, Racket, and Foodies. Acquisition details are listed below: eng rice Engine Cost to Poultrade to Food at transfer price $130,800 $163,800 $84,800 113.400 151,200 37,800 The individual financial statements for these two companies as of December 31, 2016, and the year then ended follows The acquisition of Mondeler On January 1, 2017, Poultrade acquired 45% of Mondelez for $803,000 and thus it obtained significant influence on the operations of Mendeles. At the date of acquisition, Mondelez had a book value of $1,000,000. It reported a net income of $155,000 and dividends of $40,000 in the current year. The following assets were undervalued at the date of acquisition as shown belewi Foodioa, Ine. S (377,000) 230,200 78.400 Poultrade, Ino. (741,000) 487,000 198,020 (30,300) (90,288) (792,000) (90,288) (68,400) (283,800) (68,400 Book Value Fair Value 49.100 $380,000 $530,000 Equipment life 30 years) Furniture (life 16 years) Patented Technology (lite 20 years) 3510,000 3590,000 Sales Cost of goods sold Operating expenses Equity in eamings in Foodies Net income Retained earnings, 1M48 Net Income Dividends declared Retained earnings, 12/31/18 Cash and reosivables Inventory Investment in Foodica Buildings (net) Equipment (net) Patents (net) Total Llabilities Common steek Retained earning, 12/31/18 Total liabilities and equities (833,188) 283,600 266,400 429,000 347,000 247,700 (332,600) 151.400 132,000 $100,000 $200,000 200,500 90, 100 The Aoquisition of Reoket On January 1, 2017, Poultrade alve nequired 10% of Rechat for $460,000 cash. During the year, Racket had a net income of $140,000 and paid dividenda of 146,000. In addition, the fair value of Poultrade's Investment in Reckel increased to $520,000 during the year. 604.809 S 4,573,TOG (440,010) (300,000) (833,188) (1,573,706) (172,200) (100,000) (332,800 (604,800) $ $ The Aoquisition of Foodies On January 1, 2017, Poultrade, Ine, aequired 60% of the common stock of Foodica, Inc., for $392,400. Feediea's book value on that date consisted of common stock of $100,000 and retained earnings of $231,900. Alne, the requisition date fair value of the 40 percent noncontrolling interest was $261,600. The aubaidiary held patents with a 10-year remaining life) that were undervalued within the company's accounting records by $81,700 and an unrecorded oustomer list (15-year remaining life) assessed at a $57,000 fair value. Any remaining excess coquisition date fair value was assigned to goodwill. Since acquisition, Poultrade has applied the equity method toite Investment in Foodica account and no goodwill impairment has occurred. At year end, there are ne intra-entity payables or receivables. Intra-entity inventory sales between the two companies have been made as follows: 1- The Board of Direotors of Poultrade directed the company to engage in several business combinations. In your opinion, what are the benefits that Poultrede would receive from such business combinations? Explain. 2- For each of the above described investments, determine what in the appropriate secounting method to be used to record the investment made by Poultrade the Fair value, Equity, consolidation). Explain your ohelee and reasoning in details 3. For each sequisition resulting in significant influence or control, determine the purchase price and the complete allocation of the purchase price, including the computation of the amortization amounts related to any differences between book value and fair value and the determination of the amount of goodwill fanyl or gain en bargain purchase (if any). Fer each of the above described investments, prepare all journal entries that Poultrade made at the date of esch requisition including entries for any extra nequition cente (of any) Year 2017 2018 Poultrade Ino. is a US-based company trading FMCG (Fast Moving Consumer Goods). In 2017, the board of directors of Poultrade decided to enter into new markets by engaging in several business combinations Subsequent to this decision, Poultrade purchased shares in three companies in 2016. The companies are Mandalas, Racket, and Foodies. Acquisition details are listed below: eng rice Engine Cost to Poultrade to Food at transfer price $130,800 $163,800 $84,800 113.400 151,200 37,800 The individual financial statements for these two companies as of December 31, 2016, and the year then ended follows The acquisition of Mondeler On January 1, 2017, Poultrade acquired 45% of Mondelez for $803,000 and thus it obtained significant influence on the operations of Mendeles. At the date of acquisition, Mondelez had a book value of $1,000,000. It reported a net income of $155,000 and dividends of $40,000 in the current year. The following assets were undervalued at the date of acquisition as shown belewi Foodioa, Ine. S (377,000) 230,200 78.400 Poultrade, Ino. (741,000) 487,000 198,020 (30,300) (90,288) (792,000) (90,288) (68,400) (283,800) (68,400 Book Value Fair Value 49.100 $380,000 $530,000 Equipment life 30 years) Furniture (life 16 years) Patented Technology (lite 20 years) 3510,000 3590,000 Sales Cost of goods sold Operating expenses Equity in eamings in Foodies Net income Retained earnings, 1M48 Net Income Dividends declared Retained earnings, 12/31/18 Cash and reosivables Inventory Investment in Foodica Buildings (net) Equipment (net) Patents (net) Total Llabilities Common steek Retained earning, 12/31/18 Total liabilities and equities (833,188) 283,600 266,400 429,000 347,000 247,700 (332,600) 151.400 132,000 $100,000 $200,000 200,500 90, 100 The Aoquisition of Reoket On January 1, 2017, Poultrade alve nequired 10% of Rechat for $460,000 cash. During the year, Racket had a net income of $140,000 and paid dividenda of 146,000. In addition, the fair value of Poultrade's Investment in Reckel increased to $520,000 during the year. 604.809 S 4,573,TOG (440,010) (300,000) (833,188) (1,573,706) (172,200) (100,000) (332,800 (604,800) $ $ The Aoquisition of Foodies On January 1, 2017, Poultrade, Ine, aequired 60% of the common stock of Foodica, Inc., for $392,400. Feediea's book value on that date consisted of common stock of $100,000 and retained earnings of $231,900. Alne, the requisition date fair value of the 40 percent noncontrolling interest was $261,600. The aubaidiary held patents with a 10-year remaining life) that were undervalued within the company's accounting records by $81,700 and an unrecorded oustomer list (15-year remaining life) assessed at a $57,000 fair value. Any remaining excess coquisition date fair value was assigned to goodwill. Since acquisition, Poultrade has applied the equity method toite Investment in Foodica account and no goodwill impairment has occurred. At year end, there are ne intra-entity payables or receivables. Intra-entity inventory sales between the two companies have been made as follows: 1- The Board of Direotors of Poultrade directed the company to engage in several business combinations. In your opinion, what are the benefits that Poultrede would receive from such business combinations? Explain. 2- For each of the above described investments, determine what in the appropriate secounting method to be used to record the investment made by Poultrade the Fair value, Equity, consolidation). Explain your ohelee and reasoning in details 3. For each sequisition resulting in significant influence or control, determine the purchase price and the complete allocation of the purchase price, including the computation of the amortization amounts related to any differences between book value and fair value and the determination of the amount of goodwill fanyl or gain en bargain purchase (if any). Fer each of the above described investments, prepare all journal entries that Poultrade made at the date of esch requisition including entries for any extra nequition cente (of any)
