Question

On January 1, 2013, Lessard acquired 80% of the share capital of Honey for $264,800. This was sufficient for Lessard to gain control over Honey. On that date, the statement of financial position of Honey consisted of:
Share capital .......... $250,000
Retained earnings....... 18,000
Liabilities........... 197,000
............... $465,000
Cash............ $ 35,000
Inventories.......... 70,000
Land ............ 65,000
Plant and equipment—net... 170,000
Trademark.......... 100,000
Goodwill .......... 25,000
............... $465,000
All of Honey’s identifiable assets and liabilities were recorded at fair value except for:
All of Honey’s identifiable assets and liabilities were recorded at fair value except for:
Additional information:
1. The plant and equipment had a further five-year life and was expected to be used evenly over that time. The trademark was considered to have an indefinite life.
2. Lessard uses the partial goodwill method.
3. During the year ended December 31, 2013, all inventories on hand at the beginning of the year were sold, and the land was sold on October 1, 2013, to another company for $80,000.
4. The income tax rate is assumed to be 40%.
5. During the current year, Honey sold a quantity of inventory to Lessard for $8,000. The original cost of these items to Honey was $5,000. One third of this inventory was still on hand at the end of the year.
6. On January 1, 2013, Honey transferred an item of plant with a carrying amount of $10,000 to Lessard for $15,000.
The item was still on hand at the end of the year. Honey depreciates the plant straight line over five years.
7. On January 1, 2014, Honey issued additional shares, which caused Lessard’s ownership to decrease to 75%. Honey now has shares of $300,000.
8. Financial information for Lessard and Honey for the year ended December 31, 2013, is shown below.
Required
(a) Prepare the consolidated statement of comprehensive income and statement of changes in equity for Lessard and its subsidiary at December 31, 2013. Lessard’s share capital at December 31, 2013 is $300,000.
(b) Calculate the adjustments to be made to the following accounts on the statement of financial position accounts as at December 31, 2013 with respect to the Honey net assets that would be included on the Lessard consolidated financial statements:
•Plant and Equipment (net)
•Inventory
Goodwill
• Non-controlling Interest
(c) Calculate the effect on consolidated equity of the issuance of the additional shares on January 1, 2014.


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  • CreatedJune 09, 2015
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