Solve the case using incomplete equity method not equity method Case 3:

In 1/1/2019 company A purchased 75% of company B outstanding share capital cash of 25000 $, and it issued 50.000 shares for investment. The book value of issued shares is 6$, and market value is 15$. And it paid 4000$ cash as a commission and 8000$ auditing and legal expenses for combination.

Company A used purchase method to account for investment in company B and

used incomplete equity method to address the change of investment

account

Below are the financial statements of A and B companies before investment.

Account

Cash Receivables Inventory Equipment Cars Total assets Payable Share capital Additional paid-in eapita Retained Earnings

Total

The financial statement of parent and subsidiary at 31/12/2019 reported as follow:

Income statements at 31/12/2019

A company 800000

(650000)

150000 (25000)

125000 28125 153125

Retained earnings at 31/12/2019 A company 13000 153125 (130000) 36125

SFP on 31/12/2019 A company 123000

165000 175000 18750 784375

80000

30000

1376125 35000 130000 650000

525000 36125 1376125

B company 10000

60000 (25000) 45000

B company 44000 85000

48000

85000

13000

Sales Cost of goods sold Gross profit

Managerial Net profit

and sales expenses

Investment Year net profit

Retained earning 1/1 Year profits or losses Dividends Retained earnings 31/12

Cash Receivables Inventory Prepaid dividends Investment in company B Equipment's, net

Cars

Total assets Payable Accrued dividends Share capital Additional paid in capital Retained earnings Total liabilities and equity

profit in subsidiary

Company A

190000 130000

180000 100000 60000 660000

210000 350000 75000 25000 660000

Company B book value fair value 120000 80000 50000 800XXO 90000

60000 45000

60000

215000

65000 120XX00

20000

215000

200XX)

B company 150000 (80000)

70000 (10000)

60000

275000

65000

18750

120000

20000 45000 275000

The following are additional information related to subsidiary company:

1- Remaining age of Equipment that are in the subsidiary company at date of acquisition (1/1/2019) 2- At the year of 2019, 75% of inventory have been sold. And remaining inventory have been sold on 2020,

is 4 years.

3- Remaining age of Cars that are in the subsidiary company at date of acquisition (1/1/2019) is 4 years.

Requirement:

1- Prepare the consolidated financial statement at the date of acquisition

2- Prepare acquisition

the consolidate financial statements for the year of