s Co Fair value 154 ADVANCED FINANCIAL ACCOUNTING SCO Book value PCO Book value $ 30,000 1 1 1 $ 700,000 420,000 130,000 200,000 100,000 (150,000) $1,400,000 Intangible asset from contracts.. Investment in 5 Co......... Fixed assets Inventory Accounts receivable.. Cash Accounts payable Net assets... ***** 350,000 60,000 90,000 20,000 (80,000) $470,000 $300,000 40,000 100,000 20,000 (80,000) $380,000 1 Share capital Retained earnings. Equity $ 700,000 700,000 $1,400,000 $200,000 180,000 $380,000 $470,000 1 1 1. Under Alternative 1, show the journal entry to record the purchase of net assets of S Co by P Co in its separate financial statements on 1 January 20x1. 2. Under Alternative 2, show the journal entry to record the acquisition in P Co's separate financial statements on 1 January 20x1. 3. Under Alternative 2, complete the consolidation worksheet below to show the group statement of financial position on 1 January 20x1. Book value SCO Book value Dr Cr Total Investment in 5 Co........ Fored assets. Inventory Accounts receivable. Carth Accounts payable Net assets $ 700,000 420,000 130,000 200,000 100,000 (150,000) $1.400,000 ******** $300,000 40,000 100,000 20,000 (80,000) $380,000 Share Capital Retained earnings Equity $ 700,000 700.000 51.400,000 $200,000 180,000 $380,000 P3.6 Fair value of considerati P3.5 Different forms of business combination P Co is keen to acquire the business of S Co on 1 January 20x1 and it can do so in one of two ways. P Co will issue shares with fair value of $700,000 as settlement for the acquisition under each alternative. (a) Alternative 1: P Co acquires 100% of the net assets (including cash) of S Co through a purchase agreement with S Co. (b) Alternative 2: P Co acquires 100% of the ownership interest of S Co from the owners of S Co. Details of the net assets of P Co and S Co on 1 January 20xl are shown below. Tax rate is 20%. Recognize the deferred tax effects, if any, on the difference between the fair value and the book value of identifiable net assets