Answers
| John Doe Enterprises(JDE) | ||||
| Cash | $3,000,000 | |||
| Fair value of stocks(500,000 x $14.90) | 7,450,000 | |||
| Total acquisition cost | $10,450,000 | |||
| Less: Fair value of net assets acquired | ||||
| Total book value of BMI | $16,970,000 | |||
| Adjustments of some assets to their fair values: | ||||
| Increase in value of land($2,550,000- $1,700,000) | 850,000 | |||
| Increase in value of building($3,400,000- $2,700,000) | 700,000 | |||
| Decrease in value of land($3,300,000- $3,700,000) | 400,000 | |||
| Total fair value of BMI's net assets | $18,120,000 | |||
| x Percent of intrest acquired in BMI | 55% | |||
| Fair value of net asset acquired | 9,966,000 | |||
| Goodwill | $484,000 | |||
| Under US GAAP and IFRS, goodwill is no longer amortized but subject to impairment test at | ||||
| the end of the accounting period at least once a yera or when necessary | ||||
| For purposes of computing JDE's share in net income of BMI, the net income of BMI shall | ||||
| be adjusted first with the following | ||||
| 1) Deduct additional depreciation for building for $100,000($700,000/7) | ||||
| 2) Add reduction in depreciation for equipment for $80,000($400,000/5) | ||||
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