Pharma Company (Pharma) is a pharmaceutical company operating in Winnipeg. It is developing a new drug for
Question:
Pharma Company (Pharma) is a pharmaceutical company operating in Winnipeg. It is developing a new drug for treating multiple sclerosis (MS). On January 1, Year 3, Benefit Ltd. (Benefit) signed an agreement to guarantee the debt of Pharma and guarantee a specified rate of return to the common shareholders. In return, Benefit will obtain the residual profits of Pharma. After extensive analysis, it has been determined that Pharma is a controlled special-purpose entity and Benefit is its sponsor. The balance sheets (in millions) of Benefit and Pharma on January 1, Year 3, were as follows:
An independent appraiser determined the fair values of Pharma's noncurrent assets. The appraiser was quite confident with the appraised value for the property, plant, and equipment but had some reservations in putting a specific value on the intangible assets.
Required
Prepare a consolidated balance sheet at January 1, Year 3, assuming that the agreement between Benefit and Pharma established the following fair values for the common shares of Pharma:
(a) $45 million
(b) $40 million
(c) $55 million
Balance SheetBalance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
Modern Advanced Accounting in Canada
ISBN: 978-1259087554
8th edition
Authors: Hilton Murray, Herauf Darrell