Method Of Investor Accounting For Acquisitions

Method Of Investor Accounting For Acquisitions

Instructions/Descriptions

Method Of Investor Accounting For Acquisitions

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Question Description

Describe the equity method and the cost method of investor accounting for acquisitions. (5 marks)

a) What is significant influence as defined by IAS 28 and give four examples of how significant influence is established? (5 marks)

b) Stattgrue Ltd obtains control of Naonite Ltd through two cash acquisitions. At July 1, 2018 purchased 25% for $205,000 when the 100% fair value of Naonite Ltd was $820,000 book value $600,000 and on July 1, 2020 purchased 50%

for $525,000, 100% fair value $1,050,000 and book value $750,000. A customer base with a 20-year life represented the initial excess payment.

Naonite Ltd Income and Dividends for 2019-2021:

a) What is significant influence as defined by IAS 28 and give four examples of how significant influence is established? (5 marks)

b) Stattgrue Ltd obtains control of Naonite Ltd through two cash acquisitions. At July 1, 2018 purchased 25% for $205,000 when the 100% fair value of Naonite Ltd was $820,000 book value $600,000 and on July 1, 2020 purchased 50%

for $525,000, 100% fair value $1,050,000 and book value $750,000. A customer base with a 20-year life represented the initial excess payment.

Income Dividend

June 30, 2019                                      90,000             30,000

June 30, 2020                                      120,000           30,000

June 30, 2021                                      150,000           60,000

Calculate the Investment in Naonite Ltd at July 1, 2020 (before purchase of the additional 50%) and June 30, 2021 (before consolidation). Show all workings (10 marks)

Method Of Investor Accounting For Acquisitions

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