29 Jun Question Assignment 3 This assignment should be comple
Question
Assignment 3
This assignment should be completed after the end of Chapter 12 and contributes 10% towards your final grade. Remember to show all your work as partial marks may be awarded.
Problem 1 (30 marks)
At the beginning of 20X2, Dahl Ltd. acquired 8% of the outstanding common shares of Tippy Ltd. for $400,000. This amounted to 80,000 shares.
At the beginning of 20X4, Dahl acquired an additional 270,000 shares of Tippy for $1,512,000. At this acquisition date, Tippy’s shareholders’ equity consisted of the following:
4% non-cumulative preferred shares $1,000,000
Common shares, 1,000,000 outstanding shares 2,400,000
Retained earnings 2,160,000
At this acquisition date, the fair values of the net identifiable assets equalled their carrying values except for the following:
Excess of fair value
over carrying value
Inventory $ 96,000
Land 800,000
At the beginning of 20X5, Dahl acquired an additional 450,000 shares of Tippy for 2,880,000. The shares were trading for $6 per share. At this acquisition date, Tippy’s shareholders’ equity consisted of the following:
4% non-cumulative preferred shares $1,000,000
Common shares, 1,000,000 outstanding shares 2,400,000
Retained earnings 2,560,000
At this acquisition date, the fair values of the net identifiable assets equalled their carrying values except for the following:
Excess of fair value over/(under)
carrying value
Accounts receivable $W(48,000)
Building and equipment (net) 720,000
Long-term debt 160,000
The building and equipment have an estimated remaining life of 10 years and the long-term debt matures in 10 years.
The condensed separate-entity financial statements for December 31, 20X6 are as follows:
Balance Sheets
As at December 31, 20X6
Dahl Ltd. Tippy Ltd.
Assets:
Cash $ 400,000 $ 560,000
Accounts receivable 1,920,000 440,000
Inventories 400,000 320,000
Land 4,400,000 800,000
Buildings and equipment (net) 8,488,000 7,200,000
Investment in Tippy (at cost) 4,792,000 ____-____
Total assets $ 20,400,000 $ 9,320,000
Liabilities:
Accounts payable $ 2,400,000 $ 400,000
Long-term debt 3,200,000 1,600,000
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