Exam 15: Step Purchases

Husch Ltd.acquired 35% of the common shares of Megia Ltd.on June 30,20X1.Husch uses the equity method to record its investment.On June 30,20X8,Husch acquired another 40% of Megia's common shares.At June 30,20X8,how should the original 35% ownership be treated?

Frey Ltd.acquired 70% of Sabo Ltd.in 20X4.On January 1,20X8,Frey acquired another 10% of Sabo's common shares for $250,000.Under the entity method,the balance of the non-controlling interest at December 31,20X7 was $660,000.What adjustment should be made to consolidated shareholders' equity to reflect Frey's additional purchase of shares?

On January 1,20X7,Water Limited purchased 700,000 shares of Bottle Inc.for $2.8 million.On January 1,20X9,Water purchased another 200,000 shares of Bottle for $950,000.During the entire period Bottle had 1,000,000 shares outstanding.Water accounts for its investment in Bottle under the equity method.The following information was extracted from the financial records of Bottle: All net identifiable assets had a fair value equal to their carrying value on the date of acquisition except the buildings.There is no goodwill reported on the separate entity financial statements of Water or Bottle.There have been no intercompany transactions between Water and Bottle. Required: Calculate the balances of following accounts on the consolidated statement of financial position at December 31,20X10,under the entity method: a.Goodwill b.NCI Determine the adjustment to equity required for the second acquisition.

Frey Ltd.acquired 70% of Sabo Ltd.in 20X4.On January 1,20X8,Frey acquired another 10% of Sabo's common shares for $250,000.Under the parent-company extension method,the balance of the non-controlling interest at December 31,20X7 was $600,000.What adjustment should be made to consolidated shareholders' equity to reflect Frey's additional purchase of shares?

When an inter-corporate investment is acquired in stages,when does the equity method first becomes appropriate?

Frey Ltd.acquired 70% of Sabo Ltd.on January 1,20X4.On January 1,20X8,Frey acquired another 10% of Sabo's common shares for $250,000. With respect to this addition purchase,which of the following is true?