Question

8.Jean and John Inc had the following balance sheets on August 31, 2019:

	Jean Inc.	John Inc.	John Inc.
	(carrying value)	(carrying value)	(fair value)
Cash	$1,200,000	$300,000	$300,000
Accounts Receivable	$ 400,000	$ 64,000	$ 64,000
Inventory	$ 240,000	$ 80,000	$ 60,000
Plant and Equipment (net)	$ 860,000	$256,000	$300,000
Trademark		$ 20,000	$ 36,000
Total Assets	$2,700,000	$720,000
Accounts Payable	$1,500,000	$300,000	$300,000
Bonds Payable	$ 600,000	$240,000	$210,000
Common Shares	$ 500,000	$ 60,000
Retained Earnings	$ 100,000	$120,000
Total Liabilities and Equity	$2,700,000	$720,000

On August 31, 2019, Jean's date of acquisition, Jean Inc. purchased 90% of John Inc. for cash consideration of $400,000.

Assuming the above balance sheets were prepared immediately before the acquisition, prepare Jean Inc's consolidated balance sheet on the date of acquisition using the Fair Value Enterprise Method

Answer 1

Jean Inc's consolidated balance sheet on 31-08-2019

Particulars	Amount($)
Cash	$1100000
Account receivables	$464000
Inventory	$300000
Plant and Equipment(net)	$1160000
Trademark	$36000
Goodwill	$194444
Total Assets	$3254444
Account Payables	$1800000
Bonds payable	$810000
Total liabilities	$2610000
Comman Shares	$500000
Retained earnings	$100000
Minority interest	$44444
Total shareholder's Equity	$644444
Total liabilities and equity	$3254444

Jean's imputed acquisition cost of acquiring 100% of John Inc. would be $400000/0.9 or $444444 (rounded)

Calculation of goodwill:-

Imputed acquisition cost - $444444

Less: fair value of John's net asset -($250000)

Goodwill(balance). $194444

Calculating of minority interest:-

Minority interest would be 10% of fair values

=10%(250000+194444) = $44444