Académique Documents
Professionnel Documents
Culture Documents
Credit
January 1, 2013
Investment in Panna Corp. - FVTPL
Cash
$1,100
$1,100
2) Although Thompson Incorporated uses ASPE, which allows for the use of the cost method,
they must use the equity method for this significate influence investment. ASPE only allows the
use of the cost method if the investments are not publicly traded and in this case Panna
Corporations shares are traded on the active market. Thus, Thompson Incorporated must use
the equity method.
ADVANCED ACCOUNTING
Debit
Credit
January 1, 2013
Investment in Panna Corp. - Equity Method
Cash
$4,500
$4,500
Goodwill Calculation
Purchase Price
Fair Value of Net Assets
Goodwill
$210,000
-197,000
$13,000
Debit
Credit
January 1, 2013
Accounts Receivable
Inventory
Plant
Patents
Trademarks
Goodwill
Current Liabilities
Long Term Liabilities
Cash
ADVANCED ACCOUNTING
$22,000
$75,000
$175,000
$25,000
$20,000
$13,000
$60,000
$60,000
$210,000
Thompson Incorporated
Consolidated Statement of Financial Position
As At January 1, 2013
Assets:
Cash
Accounts Receivable
Inventory
Plant
Patents
Trademarks
Goodwill
Total Assets
$ 190,000
102,000
175,000
675,000
125,000
20,000
133,000
$ 1,420,000
$ 220,000
160,000
1,000,000
40,000
$ 1,420,000
3) This business combination is acquiring enough voting shares to control the other
company. Since this transaction took place after January 1, 2011, IFRS 3 requires that the
acquisition method be used to account for the combination. Using this method Thompson
Incorporated will record the acquired net assets at fair value and prepare consolidated
Financial Statements.
Debit
Credit
January 1, 2013
Investment in Panna Corporation
Cash
$100,000
$125,000
Common Shares
Cash
ADVANCED ACCOUNTING
$100,000
$125,000
$5,000
$5,000
Goodwill Calculation
Acquisition Cost
Fair Value of Net Assets
Less: Goodwill of Panna Corp.
Adjusted Fair Value of Net Assets
Goodwill
$225,000
$217,000
-10,000
$207,000
$18,000
Thompson Incorporated
Consolidated Statement of Financial Position
As At January 1, 2013
Assets:
Cash
Accounts Receivable
Inventory
Plant
Patents
Trademarks
Goodwill
Total Assets
$ 305,000
102,000
175,000
675,000
125,000
20,000
138,000
$ 1,540,000
$ 220,000
160,000
1,120,000
40,000
$ 1,540,000
4)
Debit
Credit
January 1, 2013
Investment in Panna Corporation
Legal Fees Expense
Cash
Goodwill Calculation
Acquisition Cost
Fair Value of Net Assets
Less: Goodwill of Panna Corp.
Adjusted Fair Value of Net Assets
Gain on Acquisition
ADVANCED ACCOUNTING
$200,000
$5,000
$205,000
$200,000
$217,000
-10,000
$207,000
$7,000
Thompson Incorporated
Consolidated Statement of Financial Position
As At January 1, 2013
Assets:
Cash
Accounts Receivable
Inventory
Plant
Patents
Trademarks
Goodwill
Total Assets
$ 205,000
102,000
175,000
675,000
125,000
20,000
120,000
$ 1,422,000
$ 220,000
160,000
1,000,000
42,000
$ 1,422,000
5) The appropriate accounting method for this transaction would be to use the Parent
Company Extension Theory because we are required to use this method in situations
involving negative goodwill. Only the parent can recognize the gain on bargain purchase.
Additionally, NCI must be measured at its share of fair value of the identifiable net assets.
Goodwill Calculation
Purchase Price
Implied Value (120,000 * 0.6)
Carrying Amount of Net Assets
Less: Goodwill of Panna Corp.
Adjusted Carrying Amount
Acquisition Differential
Fair Value Change
Accounts Receivable
Inventory
Plant
Trademarks
Current Liabilities
Long Term Liabilities
Gain on Bargain Purchase
NCI (40% )
ADVANCED ACCOUNTING
$120,000
$200,000
$185,000
-10,000
175,000
$25,000
FV-CA
-$3,000
5,000
10,000
20,000
-5,000
5,000
-32,000
-$7,000
$80,000
LISA STANLEY AND CHRISTINA BUNGHARDT
Thompson Incorporated
Consolidated Statement of Financial Position
As At January 1, 2013
Assets:
Cash
Accounts Receivable
Inventory
Plant
Patents
Trademarks
Goodwill
Total Assets
$ 290,000
102,000
175,000
675,000
125,000
20,000
120,000
$ 1,507,000
$ 220,000
160,000
1,000,000
47,000
80,000
$ 1,507,000
ADVANCED ACCOUNTING