Homework Answers
Solution to part a:
Calculation of Gain On Acquisition
| Acquisition cost | $ 20,000,000 | |
| Fair value of non controlling Interest | 4,000,000 | |
| Total (a) | $ 24,000,000 | |
| Book value of sparrow | $ 26,000,000 | |
| Fair value less Book value | ||
| Land | ( 700,000) | |
| Other Plant Assets | ( 2,000,000) | |
| Identifiable Intangible assets | 3,000,000 | |
| Fair value of identifiable net assets (b) | $ 26,300,000 | |
| Gain on acquisition (b) - (a) | $ 2,300,000 |
Calculation of Book Value = Capital stock + Retained Earnings - Accumulated other comprehensive loss - Treasury Stock
= 3,000,000 + 25,000,000 - 1,500,000 - 500,000
= 26,000,000
Peregrine's Acquisition entry:
| Particulars | Debit in ('000)$ | Credit in ('000) $ |
| Investment in Sparrow (Balancing fig.) | 22,300 | |
| Merger Expenses | 2,500 | |
| Cash (20,000 + 2,500) | 22,500 | |
| Gain on Acquisition | 2,300 |
Solution to part b:
Consolidated Financial Statement Working Papers:
| Particulars | Debit ('000) $ | Credit ('000) $ |
| Capital Stock | 3,000 | |
| Retained Earnings | 25,000 | |
| Accumulated other comprehensive loss | 1,500 | |
| Treasury Stock | 500 | |
| Investment in Sparrow (80% of 26,000) | 20,800 | |
| Non-controlling Interests in sparrow (20% of 26,000) | 5,200 |
| Identifiable Intangible Assets | 3,000 | |
| Non- controlling Interests in Sparrow (5,200 - 4,000) | 1,200 | |
| Land | 700 | |
| Other plant assets ,net | 2,000 | |
| Investment in Sparrow ( 22,300 - 20,800) | 1,500 |
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