Question

Pen Ltd. acquired an 85% interest in Silk Corp. on December 31, Year 1, for $646,000. On that date, Silk had common shares of $500,000 and retained earnings of $100,000. The imputed acquisition differential was allocated $70,000 to inventory, with the balance to patents being amortized over 10 years. Silk reported profit of $30,000 in Year 2 and $52,000 in Year 3. While no dividends were declared in Year 2, Silk declared a dividend of $15,000 in Year 3.
Pen, which uses the cost method, reported a profit of $28,000 in Year 2 and a loss of $45,000 in Year 3. Pen's retained earnings on December 31, Year 3, were $91,000.
Required:
Compute the following:
(a) Non-controlling interest in profit for Year 2 and Year 3
(b) Consolidated profit attributable to Pen's shareholders for Year 2 and Year 3
(c) Consolidated retained earnings at December 31, Year 3
(d) Non-controlling interest at December 31, Year 3
(e) Investment in Silk at December 31, Year 3, if Pen had used the equity method
(f) Consolidated patents at December 31, Year 3


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  • CreatedJune 08, 2015
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