The Acquisition Cost
1) Peter Inc. acquired 100% of the outstanding Common Stock of Simran Inc. for $ 250,000 cash and 10,000 shares of its own common stock ($1 par value), which was trading at $_5_ per share at the acquisition date. [2 + 3 Marks]
(a) Determine the Acquisition Cost.
(b) Pass Journal Entry in the Book of Parent Company.
2) Parkin Corporation created Sunlight Corporation with a transfer of $800 cash. During Sunlight Corp.’s first year of operations, it generated a net loss of $150 and paid no dividends. During Sunlight Corp.’s second year of operations, it generated net income of $350 and paid dividends of $80. [Chapter 2]
a) Pass Journal Entries in the Book of Parkin Corporation for two years using Equity Method.
b) Prepare ‘Investment in Sunlight Corporation Account’ for two years and show the balance of each year in the Book of Parent Company using Equity Method.
3) There are different approaches or theories that might serve as a basis for preparing consolidated financial statements. Explain these approaches by giving at least two points of each. (5 Marks)