On January 1, 20X6, Big Inc. acquired 100% of the outstanding shares of Small Corp. for $ 10,000,000 cash. On this date, small had shareholders’ equity of $ 8,000,000, including $ 4,000,000 in retained earnings? Small had buildings and equipment that had a fair value of $ 1,200,000 less than carrying value, inventory that had a fair value of $ 300,000 greater than carrying value, and investments that had a fair value of $ 1,300,000 greater than carrying value.
The statements of financial position of the two companies on December 31, 20X6, are shown below.
Additional Information
1. The goodwill on Small’s books arose from the purchase of another company several years ago, a company that has since been amalgamated into Small. The goodwill was assumed to have a fair value of zero on January 1, 20X6.
2. Small’s plant and equipment has an estimated average remaining life of 10 years from January 1, 20X6. The net carrying value of the plant and equipment was $ 10,000,000 on that date, after deducting $ 4,000,000 of accumulated depreciation.
3. On January 1, 20X6, Big held inventory of $ 800,000 that had been purchased from Small. Small had sold the merchandise to Big at a 100% markup over cost.
4. On December 31, 20X6, Big held inventory of $ 1,000,000 that had been purchased from Small during 20X6 at 100% above Small’s cost.
5. At the end of 20X6, Big owed Small $ 400,000 for merchandise purchased on account.
6. During 20X6, Small sold an investment for $ 800,000. The investment had cost Small $ 360,000, and had a fair value of $ 600,000 on January 1, 20X6.
7. Big’s retained earnings on December 31, 20X6, include dividend income received from Small. Small declared dividends of $ 400,000 in 20X6.

Prepare a consolidated statement of financial position for Big Inc. at December 31,20X6.

  • CreatedMarch 13, 2015
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