Use the following information for the next THREE items

At the beginning of 2020, Khaled Co. acquired 80 percent of the common stock of Blue Sky Co. for $640,000. On the date of acquisition, Blue Sky had Common Stock of $200,000 and Retained Earnings of $450,000. Blue Sky's buildings had a book value of $160,000, a fair value of $260,000, and a remaining useful life of 20 years. The remaining excess of the fair over book value of Blue Sky's net assets was attributable to goodwill. The value of the NCI was estimated based on the price paid by Khaled Co. for the controlling interest.

For the year ended 2020, Blue Sky had a net income of $150,000 and dividends of $35,000.

1. Assuming that Khaled Co. uses the cost method to account for its investment in Blue Sky Co. in its books. What is the amount of the equity conversion needed to convert the balance of the Investment in Blue Sky account to the required balance under the simple equity method at the end of 2020? (Enter a positive number to increase the balance of the Investment account, a negative number to decrease the balance, or 0 for no change)
2. What entry will be prepared to distribute the excess of the fair over the book value of Blue Sky's assets at the end of 2020?

RE-Blue Sky

Buildings

Investment in Blue Sky

Goodwill

3. On the date of acquisition (beginning of 2020), how much of Blue Sky's equity will be eliminated when Khaled Co. consolidates the financial statements? (That is what is the credit amount to the "Investment in Blue Sky" account in the elimination entry prepared by Khaled Co.?) (Enter a positive amount).

a, The acquirer should record the acquiree's liabilities associated with restructuring or exit activities ________.

b, if the restructuring or exit activities are planned (i.e., in the future) by the acquirer themselves, rather than by the acquiree.

c, None of these.

d, if the acquiree has an existing obligation to other entities.

4. Which of the following is true about the non-controlling interest?

a, None of these statements is true.

b, It can receive a share of the gain on acquisition of the subsidiary.

c, Its value increases as the subsidiary pays more dividends.

d, Its value on the date of acquisition may not always be proportional to the price paid by the parent to acquire the controlling interest in the subsidiary.

5. Match the level of investment to the appropriate income from the investee that should be recorded by the investor.

Passive Investment (< 20%)

Influential Investment (20 - 50%)

Controlling Investment (> 50%)

6. ABC Co. acquired the net assets of XYZ Co. at the beginning of 2022 for $65,000. On that date, XYZ had assets with a book value of 120,000 and a fair value of 150,000. XYZ's liabilities had a book and a fair value of $60,000. What was the goodwill or gain on acquisition that ABC recorded when acquiring XYZ's net assets? (Enter a positive number for goodwill or a negative number for gain on acquisition).