Reference no: EM132602243

Question 1: ELE Ltd. acquired 60% of ENT's voting shares on Jan. 1 Y6 for $480,000 when ENT's financial position showed common shares of $320,000 and R/E of $220,000. On that day, ENT's inventories were undervalued by $20,000 and a patent with an estimated remaining life of five years was overvalued by $30,000. ELE uses cost method for its investments in ENT.

ENT reported the followings after the acquisition:

                                   Profit                   Dividends

Dec 31, Y6                   $91,800               $26,130

Dec 31, Y7                  (22,140)                12,000

Dec 31, Y8                   67,600                  35,700

What is the increase of ENT's fair value since acquisition under the entity theory?

A. $137,260

B. $135,260

C. $139,262

D. $61,430

Question 2: IIT became a Sub of the Parent on Jan. 1, 2019. On that day, its $100,000 face-value 10- year bond had a carrying value of $107,019.47 and a market value of $105,456.82. The bond was issued on Jan 1, 2018 with a stated interest rate of 8% and semi-annual interest payment. On the issuing day, the market rate was 6%.

For 2019, amortizing bond acquisition differential for consolidation will

A. Increase bond interest expense.

B. Decrease bond interest expense.

C. Increase bond interest payment.

D. Decrease bond interest payment.