ADVANCED FINANCIAL ACCOUNTING-ACCESS
ADVANCED FINANCIAL ACCOUNTING-ACCESS
12th Edition
ISBN: 9781260518740
Author: Christensen
Publisher: MCG
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Chapter 4, Problem 4.2E
To determine

Concept Introduction:

Equity Method of valuation of investment: In this method, parent company value investment at the historical cost of the investment plus apportioned profit less dividend paid by the subsidiary company.

To Prepare: Journal entry to value the Investment at equity method.

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1. Matray acquired 16,000 ordinary shares of Petros on 1 April 20X9. On 31 December 20X8Petros’s accounts showed a share premium of $4,000 and retained earnings of $15,000. The fairmarket value of non-controlling interest at acquisition was $7,000.Below are the statements of financial position for the two companies as at 31 December 20X9:Matray PetrosNon-current assets:Property, plant and equipment 39,000 33,000Investment in Petros 50,000Current assets 78,000 40,000Total assets 167,000 73,000Equity and liabilitiesEquityOrdinary shares of: $1 each 100,000: 50c each 10,000Share premium 7,000 4,000Retained earnings 40,000 39,000Current liabilities 20,000 20,000Total equity and liabilities 167,000 73,000Required:Prepare the consolidated statement of financial position of Matray as at 31 December 20X9. Assumeprofits have accrued evenly throughout the year
On 1 October 20X4, Pyramid Co acquired 80% of Square Co’s nine million equity shares. At the date of acquisition, Square Co had an item of plant which had a fair value of $3m in excess of its carrying amount. At the date of acquisition it had a useful life of five years. Pyramid Co’s policy is to value non-controlling interests at fair value at the date of acquisition. For this purpose, Square Co’s shares had a value of $3•50 each at that date. In the year ended 30 September 20X5, Square Co reported a profit of $8m. At what amount should the non-controlling interests in Square Co be valued in the consolidated statement of financial position of the Pyramid group as at 30 September 20X5?   A $26,680,000 $7,900,000 $7,780,000 $12,220,000
Ariadne Corporation acquired the net assets of Turgo Corporation by issuing 10,000 ordinary shares with par value of P10 and bonds payable with a face amount of P500,000. The bonds are classified as financial liability at amortized cost.At the time of acquisition, the ordinary shares are publicly quoted at P20 per share. On the other hand, thebonds payable, classified as financial liability at amortized cost, are trading at 110.Ariadne paid P10,0000 share issuance costs and P20,000 bond issue costs. It also paid P40,000 acquisition related costs and P30,000 indirect costs of business combination.Before the date of acquisition, Ariadne and Turgo reported the following data:Ariadne TurgoCurrent assets 1,000,000 500,000Non-current assets 2,000,000 1,000,000Current liabilities 200,000 400,000Non-current liabilities 300,000 500,000Ordinary shares 500,000 200,000Share premium 1,200,000 300,000Retained earnings 800,000 100,000At the time of acquisition, the current assets of Ariadne have fair…

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ADVANCED FINANCIAL ACCOUNTING-ACCESS

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