Question 1 (20 marks) Big Guy Inc. (Big Guy) purchased 80% of the outstanding voting shares of Humble Corp. (Humble) for $360,000 on July 1, 2020. On that date, Humble had common shares and retained earnings worth $180,000 and $90,000, respectively. The equipment had a remaining useful life of $ years from the date of acquisition. Humble's bonds mature on July 1, 2030. Both companies use straight line amortization, and no salvage value is assumed for assets. The trademark is assumed to have an indefinite useful life. Goodwill is tested annually for impairment. The balance sheets of both companies, as well as Humble's fair market values on the date of acquisition are disclosed below: Balance sheets Big Guy Humble Humble as of July 1, 2020 carrying value fair value Cash $800,000 $245,000 $245.000 Accounts receivable $240,000 $40,000 $40.000 Inventory $60,000 $45,000 $50.000 $5,000 Equipment (net) $900,000 $80,000 $72.000 [$8.000) Trademark $90,000 $193,000 $103,000 Total assets $2,000,0 0 0 $500 0 00 Current liabilities $200.000 $160,000 $160,000 SO Bonds payable $260.000 $70,000 $40,000 ($30.000) Common shares $900,000 $180,000 ($ 180,000) Retained earnings $640-000 $90.000 ($90.000) Total liabilities & equity $2,0100,0 00 $500.0 00 The following are the financial statements for both companies for the fiscal year ended June 30, 2023: Income statement Balance sheets for the year ending June 30, 2013 Big Guy Humble as of June 30, 2023 Big Guy Humble Sales $640,000 $240.000 Cash $1,200,000 $365,000 Investment revenue $8,480 Accounts receivable $270,000 $55,000 Less expense: Investment in Humble $319,040 Cost of goods sold $300,000 $160,000 Inventory $70,000 $70,000 Depreciation $81,000 $34,000 Equipment (net) $820,000 $65,000 Interest expense $34.000 $26,000 Trademark $85.000 Other expenses $5.000 $8.000 Total assets $2,679,040 $640,000 Net income $228,480 $12,0 00 Current liabilities $350,000 $332,000 Bonds payable $260,000 $70,000 Retained earnings statements Common shares 5900,000 $180,000 Balance July 1, 2022 $960,560 $48.000 Retained earnings $1,169.040 $58.000 Net income $228,480 $12,000 Total liabilities & equity $2,679,040 S60 0un tivat Dividends $20,000) ($2,000) Balance June 30, 2023 $1,169,040 $58,000 Go to SetOther information: An impairment test conducted in September 2021 on Big Guy's goodwill resulted in an impairment loss of $10,000 being recorded. Both companies use a FIFO system, and Humble's entire inventory on the date of acquisition was sold during the following year. During 2023, Humble borrowed $20,000 in cash from Big Guy interest free to finance its operations. As of June 30, 2023, the amount remained unpaid. Big Guy uses the equity method to account for its investment in Humble. Assume that the fair value enterprise (FVE) method applies. This document is available on studocu Downloaded by Armir Saraci (armirsaraci 1 @gmail.com) a) What is the amount of goodwill arising from this business combination on July 1, 2020? (2 marks) b) What is the amount of non-controlling interest (NCI) on Big Guy's consolidate balance sheet on July 1, 2020? (2 marks) c) Prepare a schedule for the changes to acquisition differential for 2021, 2022 and 2023. Provide an opening balance as of 2020-07-01 and ending balance as of 2023-06-30. ($ marks) What is the amount of depreciaiton expense appearing on Big Guy's June 30, 2023 consolidated income statement?' (1 mark) What is the amount of interest expense appearing on Big Guy's June 30, 2023 consolidated income statement? (1 mark) What is the amount of net income attributable to non-controlling interest that would appear on Big Guy's June 30, 2023 consolidated income statement? (2 marks) What is the amount of non-controlling interest that would appear on Big Guy's consolidated balance sheet as at June 30, 2023? (2 mark) h) What is the amount that would appear as Big Guy's investment in Humble Corp. on its June 30, 2023 consolidated balance sheet? (1 mark)