Question

On March 31, 2018, Popkum Inc. (Popkum) purchased 65 percent of the common shares of Saguay Ltd. (Saguay) for $1,200,000. Popkum's and Saguay's balance sheets on March 31, 2018 just before the purchase were:


Management determined that the fair values of Saguay’s assets and liabilities were as follows:
Fair value of Saguay’s identifiable
assets and liabilities on March 31, 2018
Current assets.................. $ 656,250
Capital assets.................. 1,462,500
Current liabilities................ 281,250
Non-current liabilities.............. 412,500

Required:
a. Calculate the amount of goodwill to be reported on Popkum's consolidated balance sheet on March 31, 2018.
b. Calculate the amount of non-controlling interest to be reported on the consolidated balance sheet on March 31, 2018.
c. Prepare Popkum's consolidated balance sheet on March 31, 2018.
d. Calculate the current ratios and debt-to-equity ratios for Popkum, Saguay, and for the consolidated balance sheet on March 31, 2018. Interpret the differences between the ratios.
e. Explain what the non-controlling interest on the balance sheet represents. How would you interpret it from the perspective of a shareholder of Popkum? How would you interpret it from the perspective of a shareholder in Saguay? How would you interpret it from the perspective of a lender?


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  • CreatedFebruary 26, 2015
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