Question

7.

On January 1, Year 5, FLA Company issued 6,300 ordinary shares to purchase 9,000 ordinary shares of MES Company. Prior to the acquisition, FLA had 180,000 and MES had 10,000 ordinary shares outstanding, which were trading at $5 and $3 per share, respectively. The following information has been assembled for these two companies just prior to the acquisition:

   

	FLA Company				MES Company
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Plant assets	$	60,000	$	70,000	$	20,000	$	25,000
Current assets		40,000		47,500		10,000		11,200
	$	100,000			$	30,000
Ordinary shares	$	30,000			$	10,000
Retained earnings		35,000				12,500
Long-term debt		15,000		19,000		2,500		3,200
Current liabilities		20,000		20,000		5,000		5,000
	$	100,000			$	30,000

Required:

(a) Prepare a consolidated statement of financial position for FLA Company and its non–wholly owned subsidiary at January 1, Year 5, under each of the following:

(i) Identifiable net assets method   

(ii) Fair value enterprise method

Answer 1

Solution:-