on december 31 year 1 p company purchased 80 of the outstanding shares of s company for 6960 cash/

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(a) Prepare a consolidated statement of financial position at the date of acquisition under each of the following:
(i) Proprietary theory
(ii) Parent company theory
(iii) Parent company extension theory
(iv) Entity theory
(b) Calculate the current ratio and debt-to-equity ratio for P Company under the four different theories. Explain which theory shows the strongest liquidity and solvency position and which method best reflects the true financial condition of the company.

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