seagram acquired 11 7 percent of time warner on january 2 year 3 financial statement 4373984

Seagram acquired 11.7 percent of Time Warner on January 2, Year 3. Financial statement data for these firms at the end of Year 3 reveal the following (amounts in millions): Required a. The total common shareholders’ equity of Time Warner on January 1, Year 3, was $1,810. Assume that any excess purchase price relates to goodwill. Compute the amount of goodwill related to Seagram’s investment in Time Warner on the date of acquisition. b. Assume for this part that Seagram had used the equity method instead of the market value method to account for its investment in Time Warner during Year 3. Compute the maximum amount of net income that Seagram would report for Year 3. Assume that the test for goodwill impairment indicates that no impairment charge is necessary for Year 3. The income tax rate is 35 percent. c. Compute the total assets for Seagram on December 31, Year 3, if it had used the equity method instead of the market value method throughout Year 3. View Solution:
Seagram acquired 11 7 percent of Time Warner on January 2

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