Question: On July 1 Year 5 Big purchased 80 of the

On July 1, Year 5, Big purchased 80% of the outstanding common shares of Little for $122,080. On that date, Little's equipment had a fair value that was $21,600 less than carrying amount. The equipment had accumulated depreciation of $20,000 and an estimated remaining useful life of 8 years. Also, at the date of acquisition, Little had an exclusive contract with the provincial government to perform periodic environmental audits of selected mining companies for the next five years. An independent business valuator indicated that a third party might pay up to $50,000 to take over this contract. All other assets and liabilities had carrying amounts equal to fair values. On June 30, Year 6, goodwill had a recoverable amount of $20,000.
On June 30, Year 6, the following financial statements were prepared. Big uses the cost method to account for its investment.
(a) Prepare a schedule to calculate and allocate the acquisition differential. Explain the rationale for the accounting treatment of the $50,000 attributed to the government contract.
(b) Prepare the consolidated financial statements of Big as at June 30, Year 6.
(c) Prepare a schedule showing the changes in non-controlling interest during the year.

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  • CreatedJune 08, 2015
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