Author: Anonymous

On January 1, 2025, Alberta Co. paid $400,000 for a 40% owne…

On January 1, 2025, Alberta Co. paid $400,000 for a 40% ownership in Peace River Co’s common shares giving Alberta Co. significant influence over the operating, investing and financing policies over Peace River Co. The Statement of Financial Position of Peace River Co. on January 1, 2025 shows:   Peace River Co. Statement of Financial Position at January 1, 2025 Book Value Fair value  Change Cash  $                 50,000  $                 50,000  $                      –   Accounts receivable                     100,000                   100,000                          –   Inventory                    150,000                   100,000                (50,000) Building – net                               400,000                   500,000                100,000 Land                   200,000                   350,000               150,000 Total   $              900,000 Accounts payable        $              200,000  $              200,000                          –   Common shares                           100,000  n/a Retained earnings                          600,000  n/a Total  $              900,000   Below, the President of Alberta Co. wants you to prepare the Acquisition Differential Schedule (ADS) on paper. Once you’ve completed the schedule answer Questions 1 to 4 and record your responses by selecting ALL that applies.  Required: 1) What components (names and dollar amounts) make up the Book Value at the Correct Pro-rata Share? (4 marks) 2) What is the Acquisition Differential (AD) in dollars? (1 mark) 3) What components (account names only) Adjusts Book Value to Fair Value at the Correct Pro-rata Share? (3 marks) 4) The difference between the Acquisition Differential and Adjustments from Book Value to Fair Value at the Correct Pro-rata Share equals $40,000. What does this $40,000 represent? (1 mark)