Solve the following problems. It will be helpful for the graded comprehensive problem found in Unit 3. Record your answers in your learning journal.

1. On January 1, 2007 A acquired a 20% shareholding in B at a cost of $40,000. On January 1, 2009, A acquired a further 40% shareholding in B at a cost of $150,000. At this time it was determined that the fair value of As 20% shareholding in B was $50,000. Between January 1, 2007 and January 1, 2009 B made a profit of $30,000.

Required: a. Calculate the cost of investment that will be used in computing goodwill b. Calculate the goodwill arising on this transaction c. Calculate the gain arising that will be recognized in the income statement assuming that As 20% shareholding did NOT allow it to exercise significant influence over B d. Calculate the gain arising that will be recognized in the income statement assuming that As 20% shareholding did allow it to exercise significant influence over B