Solution to PM-final

# 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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