• Airlangga University

• PR 12345

E 8-2 Piecemeal Acquisition

Information regarding the Victor HF acquisition of Edma HF’s common stock in 2014 is as

follows:

■ On February 15, Victor HF purchased 5 percent of Edma HF’s common stock for $10,000.

■ On August 10, Victor HF purchased an additional 10 percent of Edma HF’s common stock

for $21,000.

■ On September 30, Victor HF purchased an additional 45 percent of Edma HF’s common

stock for $99,000. Victor HF obtained control over Edma HF as the result of this transaction.

Assume that the net assets book value of Edma HF were equal to its fair value on

September 30. Edma HF’s net income for 2014 was $60,000, earned proportionately during

the year. Edma HF declared no dividends during the year.

Required:

1. Calculate any gain or loss to revaluate the investment in Edma HF.

2. Calculate income from Edma HF in 2014.

3. Calculate the amount of investment in Edma HF at the end of 2014.

1. Cost to obtain control over Edma HF $99,000

Implied fair value of Edma HF ($99,000 / 45%) $220,000

The fair value of 15% interest ($220,000 x 15%) $33,000

Cost to obtain 30% of Edma HF’s interest ($10,000 + $21,000) $31,000

Gain from revaluation of investment in Edma HF $ 2,000

2. Income from Edma HF in 2014 ($60,000 x 60% x 3 /12) $ 9,000

3. Cost to purchase 5% interest $10,000

Cost to purchase 10% interest $21,000

Cost to purchase 45% interest $99,000

Gain on revaluation of investment $2,000

Income from Edma HF in 2014 $ 9,000

Investment in Edma HF at the end of 2014 $141,000

E 8-4 Computation of gain or loss after deconsolidation

Ainun Corporation owns an 80 percent interest in Bahrun Corporation. At December 31, 2016,

its Investment in Bahrun account is $3,500,000 and consists of $3,000,000 in equity and the