# Question: A Company owns 75 of B Company and 40 of

A Company owns 75% of B Company and 40% of C Company. B Company owns 40% of C Company. The following information was assembled at December 31, Year 7.
• A Company purchased its 40% interest in C Company on January 1, Year 4. On that date, the negative acquisition differential of \$10,000 on the 40% investment was allocated to equipment with an estimated useful life of 10 years.
• A Company purchased its 75% of B Company’s common shares on January 1, Year 6. On that date, the 100% implied acquisition differential was allocated \$40,000 to buildings with an estimated useful life of 20 years, and \$53,333 to patents to be amortized over 8 years. The preferred shares of B Company are non-cumulative.
• On January 1, Year 7, B Company purchased its 40% interest in C Company for \$92,000. The carrying amount of C Company’s identifiable net assets approximated fair value on this date.
• The inventory of B Company contains a profit of \$2,400 on merchandise purchased from A Company. The inventory of A Company contains a profit of \$3,000 on merchandise purchased from C Company.
• On December 31, Year 7, A Company owes \$20,000 to C Company and B Company owes \$2,000 to A Company.
• Both A Company and B Company use the equity method to account for their investments but have made no equity method adjustments in Year 7.
• An income tax rate of 40% is used for consolidation purposes.
Required:
(a) Calculate non-controlling interest’s share of consolidated net income for Year 7.
(b) Prepare a consolidated statement of retained earnings for Year 7.
(c) Prepare a consolidated balance sheet as at December 31, Year 7. Show all calculations.

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