On January 1, 2019 Prism Ltd. purchased 90% of Solstice Co. at a cost of $225,000. On this date, Solstice’s shareholders

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On January 1, 2019 Prism Ltd. purchased 90% of Solstice Co. at a
cost of $225,000.
On this date, Solstice’s shareholders’ equity was as follows:
Common shares (10,000) $100,000 Retained earnings 110,000
$210,000
• The book values of all of Solstice’s net assets were equal to
fair market value, except for specialized equipment, which was
undervalued by $40,000
• The equipment had an estimated useful life of 5 years
• On July 1, 2019, Solstice issued an additional 2,000 shares
for $75,000. Prism did not acquire any of these shares.
• On October 1, 2019 Solstice’s share price had fallen to $30
per share. Prism purchased 1,000 shares at this price on the open
market.
• On December 31, 2019 Solstice reports a net income of $40,000
(earned evenly throughout the year) and declared dividends of
$10,000
REQUIRED:
a) Prepare an acquisition differential schedule for 2019 showing
the controlling and non controlling interest’s share of the changes
occurring throughout the year.
b) Calculate the equity method balance in the investment in
Solstice account as at December 31, 2019. Clearly show all
calculations for impact of ownership changes.