Question: P4 2 Summer Corp owns all the shares of Keira Ltd

P4-2 Summer Corp. owns all the shares of Keira Ltd. The shares were acquired on July 1, 2011, by Summer at a cost of $60,000. At acquisition date, the capital of Keira consisted of 44,000 common shares at $1. There were retained earnings of $4,000. All the identifiable assets and liabilities of Keira were recorded at amounts equal to fair value, except for:
The land was sold on June 1, 2012, for $94,000. The machinery had a further five-year life. The inventory was all sold by December 31, 2011. Keira has not recorded any goodwill at July 1, 2011. Goodwill has not been impaired. The trial balances of the two entities at June 30, 2013, are shown below.
Additional information:
1. Intragroup sales of inventory for the year ended June 30, 2013, from Summer to Keira were $14,000 and from Keira to Summer were $3,000.
2. Intragroup inventory on hand:
(a) at July 1, 2012: held by Keira, purchased from Summer at a profit of $400.
(b) at June 30, 2013: held by Summer, purchased from Keira at a profit of $200.
3. Intragroup machinery on hand at June 30, 2013:
(a) Summer: purchased from Keira on July 1, 2012, for $10,000 at a profit to Keira of $500. Depreciation rate is straight line over 10 years.
(b) Keira: purchased from Summer on January 1, 2012, for $12,000, at a loss to Summer of $500. Depreciation rate is 20% p.a. on cost.
4. Summer advanced $5,000 to Keira on January 1, 2013. Summer charges 5% interest annually. Kiera had not yet paid the interest or the principal.
5. Keira paid a royalty fee of $1,000 to Summer during 2013.
6. The income tax rate is 30%
Prepare consolidated financial statements (excluding the Statement of Cash Flows) of Summer and Keira as at
June 30, 2013.

View Solution:

Sale on SolutionInn
  • CreatedJune 09, 2015
  • Files Included
Post your question