Solution to PM-final - 1 Measure 60 Purchase of Sweet Soaps...

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1. Measure 60% Purchase of Sweet Soaps Inc., January1,20X7 Purchase price $300,000 100% fair value based on Purchase price (300,000*(100%/60%) $500,000 Less carrying value of SS’s net identical assets $ (302,000) = Fair Value Adjustment, allocated below $198,000 Fair value Adjustment FVA Allocated Inventory $110,000 $110,000 Account receivable $15,000 $15,000 Account payable $(50,000) $ (50,000) Total fair value adjustment allocated to identifiable assets$ 75,000 Balance of FVA allocated to goodwill @ 100%$ 123,000 NCI value= 500,000*40% $200,000 2. Eliminate inter-company transactions and balances: Downstream sales of merchandise $800,000 Inter-company loan $100,000 Inter-company interest income/expense$5,000 =$100,000*6%*10/12=$5,000 Inter-company dividend $100,000*60%=$60,000 Eliminate unrealized profits: Unrealized profits on downstream sales of merchandise $800,000*40%*25%=$80,000 Realized and unrealized gain on sale of equipment by SS to PM in 20X7 Gain on sale of equipment 10,000 Remaining useful life of equipment 5 Realization of gain per year 2,000 Realization during 20X7 2,000 Balance gain unrealized at end of 20X7 8,000 3.Amortization FVA Allocated Amort. Period Amort. Amort./ impairment loss during 20X7 Balance of FVA remaining at the end of 20X7 per year Inventory $110,000 $110,000 $0 Account $15,000 $15,000 $0
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receivable Account payable $(50,000) $(50,000 ) $0 Goodwill $123,000 $123,000 Total $198,000 $75,000 $123,000 PeachMinty’sConsolidated Statement of Income
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