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Advanced Financial Accounting Exam 2015

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18 views1 page

Advanced Financial Accounting Exam 2015

Uploaded by

jacob06lacrosse
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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STUDENT # _______________________________________________________

QUESTION 5 (10 MARKS)


CALCULATION OF ACQUISITION DIFFERENTIAL
Cost for 75% of Liam Company; January 1, 2014 1,200,000
Implied cost for 100% of Liam Ltd. 1,600,000 0.5
Book value of Liam Ltd.'s net assets
common stock 750,000
retained earnings 400,000 1,150,000 0.5
Acquisition differential 450,000
FVI - rental equipment (18,500) 0.5
(18,500)
Goodwill 468,500
ACQUISITION-DIFFERENTIAL AMORTIZATION AND IMPAIRMENT SCHEDULE
Balance, Jan 1/14 Amort for 2014 Balance, Dec 31/14
FVI - rental equipment (18,500) (9,250) (9,250) 1
Goodwill 468,500 468,500
450,000 (9,250) 459,250

PART A - CALCULATE GAIN/LOSS TO MITCHELL COMPANY ARISING FROM ISSUANCE OF SHARES


Ownership before share issuance (150000/200000) 75.00% 0.5
Ownership after share issuance (150000/210000) 71.43% 0.5
Change in ownership 3.57% 0.5
Percentage of investment sold 4.76% 1

Balance in investment account as of December 31, 2014, equity method


Balance in investment account, January 1, 2014, cost method or equity method 1,200,000 0.5
add: share of net income for 2014 75% x $171,000 128,250 0.5
less: share of acquisition differential amortization for 2014 75% x ($9250) (6,938) 0.5
Balance in investment account, December 31, 2014, equity method 1,335,188
Loss due to reduction of investment account
(4.76% x $1335188) 63,580 1.5
Gain due to ownership of new assets resulting from sub share issuance
(71.43% x $75000) 53,571 1.5
Net loss to parent due to share issuance (10,009) 0.5

10

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