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on december 31 year 2 blue purchased a percentage of the outstanding ordinary shares 737222

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

$ 640,000

$430,000

Accumulated amortization

(200,000)

(110,000)

Investment in Joy Corp.

424,000

Inventory

105,000

220,000

Accounts receivable

78,000

35,000

Cash

17,000

5,000

$1,064,000

$580,000

Ordinary shares

$ 422,000

$300,000

Retained earnings

224,000

(40,000)

Long term debt

250,000

240,000

Current liabilities

168,000

80,000

$1,064,000

$580,000

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

$1,060,000

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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