On December 31, Year 2, Blue purchased a percentage of the outstanding ordinary shares of Joy

Accounting Jul 09, 2022

On December 31, Year 2, Blue purchased a percentage of the outstanding ordinary shares of Joy. On this date all but two categories of Joy's identifiable assets and liabilities had fair values equal to carrying amounts.

Following are the statements of financial position of Blue Ltd. and Joy Corp. on December 31, Year 2 subsequent to the acquisition.

On December 31, Year 2, Blue purchased a percentage of the outstanding ordinary shares of Joy. On this date all but two categories of Joy’s identifiable assets and liabilities had fair values equal to carrying amounts.

Following are the statements of financial position of Blue Ltd. and Joy Corp. on December 31, Year 2, subsequent to the acquisition.

	Blue Ltd.			Joy Corp.
Plant and equipment	$	678,000		$	449,000
Accumulated amortization		(219,000	)		(129,000	)
Investment in Joy Corp.		612,000			–
Inventory		124,000			239,000
Accounts receivable		97,000			54,000
Cash		36,000			2,000
	$	1,328,000		$	615,000
Ordinary shares	$	441,000		$	319,000
Retained earnings		431,000			(62,000	)
Long-term debt		269,000			259,000
Current liabilities		187,000			99,000
	$	1,328,000		$	615,000

Below is the consolidated statement of financial position for Blue at December 31, Year 2.

BLUE LTD.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
December 31, Year 2
Plant and equipment	$	1,117,000
Accumulated amortization		(219,000)
Goodwill		324,000
Inventory		383,000
Accounts receivable		151,000
Cash		38,000
	$	1,794,000
Ordinary shares	$	441,000
Retained earnings		431,000
Non-controlling interest		108,000
Long-term debt		528,000
Current liabilities		286,000
	$	1,794,000

Required:

(a) From the information provided, determine the percentage of Joy’s ordinary shares purchased by Blue on December 31, Year 2.

Percentage of Blue’s ownership %

(b-1) Which of Joy’s assets, liabilities or equity items had fair values that were not equal to their carrying amounts at acquisition? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

Long-term debtunanswered
Goodwillunanswered
Plant and equipmentunanswered
Ordinary sharesunanswered
Retained earningsunanswered
Inventoryunanswered
Cashunanswered
Bonds

(b-2) Calculate the fair value of each of the assets, liabilities, or equity items whose fair values were not equal to their carrying amounts at December 31, Year 2.

Below is the consolidated statement of financial position for Blue at December 31, Year 2.

		BLUE LTD.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
	December 31, Year 2
Plant and equipment		1,060,000
Accumulated amortization		(200,000)
Goodwill		150,000
Inventory		345,000
Accounts receivable		113,000
Cash		22,000
		1,490,000
Ordinary shares		422,000
Retained earnings		224,000
Non-controlling interest		106,000
Long-term debt		490,000
Current liabilities		248,000
		1,490,000

Required:

(a)		From the information provided, determine the percentage of Joy's ordinary shares purchased by Blue on December 31, Year 2.
(b)		Which of Joy's assets or liabilities had fair values that were not equal to their carrying amounts at acquisition? Calculate the fair value of each of these assets at December 31, Year 2.

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