On January 1, 2019, Par Inc. purchased 90% of the voting shares of Sub Inc. for...
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On January 1, 2019, Par Inc. purchased 90% of the voting shares of Sub Inc. for $810,000. On that date, Sub's common stock and retained earnings were valued at S350,000 and S250,000 respectively. On January 1 2019, the fair values of Sub's net identifiable assets approximated the carrying values with the following exceptions: • Inventory had a fair value that was S4,000 lower than its carrying amount. This inventory sold during 2019. • Patents had a fair value that was $200,000 higher than its carrying value. Long-term debt had a fair value that was $9,000 lower than its carrying value. On January 1, 2019, the patents had an estimated useful life of 20 years. The long-term debt is due in five years from that date. Additional Information: Sub Inc's inventory turnover is 6 times per year. • During 2019, a goodwill impairment loss of $12,000 was recognized, and an impairment test conducted during 2020 indicated that a further loss of S6,000 had occurred. • Par Inc's accounts payable at December 31, 2020 includes $12,500 due to Sub Inc. The financial statements for Par Inc and its subsidiary, Sub Company for the fiscal year ending December 31, 2020 follow: Par Inc. Sub Inc. Income Statements $ 650,000 90,000 740,000 Sales $ 880,000 Dividend Revenue 880,000 Less: Expenses: Cost of Goods Sold: 325,000 40,000 440,000 20,000 Depreciation Expense Other Expenses Income Tax Expense 90,000 75,000 114,000 569,000 $ 171,000 138,000 673,000 S 207,000 Net Income Retained Earnings Statements Balance, January 1, 2020 Net Income Less: Dividends Retained Earnings 480,000 325,000 171,000 (80,000) $ 571,000 207,000 (100,000) $ 432,000 Balance Sheets $ 39,000 $ 13,000 129,500 Cash Accounts Receivable 125,000 Inventory Investment in Sub Inc. (cost) 180,000 810,000 150,000 Patents 200,000 Buildings (net) Equipment (net) Land 250,000 100,000 300,000 75,000 50,000 $ 1,037,500 75,000 $ 1,579,000 Total Assets Current Liabilities 183,000 115,500 Long term debt 225,000 140,000 Common Shares 600,000 350,000 Retained Earnings Total Liabilities and Equity 571,000 $ 1,579,000 432,000 S 1,037,500 Required: a. Prepare the following December 31, 2020 consolidated financial statements: Income statement, Statement of Financial Position, and Statement of Retained Earnings. Note: You must provide all supporting calculations and schedules. The statements must be in their correct form. b. Assume that Par had used the equity method to account for its investment in Sub. Calculate the Investment in Sub at December 31, 2020. Label work and show supporting calculations. On January 1, 2019, Par Inc. purchased 90% of the voting shares of Sub Inc. for $810,000. On that date, Sub's common stock and retained earnings were valued at S350,000 and S250,000 respectively. On January 1 2019, the fair values of Sub's net identifiable assets approximated the carrying values with the following exceptions: • Inventory had a fair value that was S4,000 lower than its carrying amount. This inventory sold during 2019. • Patents had a fair value that was $200,000 higher than its carrying value. Long-term debt had a fair value that was $9,000 lower than its carrying value. On January 1, 2019, the patents had an estimated useful life of 20 years. The long-term debt is due in five years from that date. Additional Information: Sub Inc's inventory turnover is 6 times per year. • During 2019, a goodwill impairment loss of $12,000 was recognized, and an impairment test conducted during 2020 indicated that a further loss of S6,000 had occurred. • Par Inc's accounts payable at December 31, 2020 includes $12,500 due to Sub Inc. The financial statements for Par Inc and its subsidiary, Sub Company for the fiscal year ending December 31, 2020 follow: Par Inc. Sub Inc. Income Statements $ 650,000 90,000 740,000 Sales $ 880,000 Dividend Revenue 880,000 Less: Expenses: Cost of Goods Sold: 325,000 40,000 440,000 20,000 Depreciation Expense Other Expenses Income Tax Expense 90,000 75,000 114,000 569,000 $ 171,000 138,000 673,000 S 207,000 Net Income Retained Earnings Statements Balance, January 1, 2020 Net Income Less: Dividends Retained Earnings 480,000 325,000 171,000 (80,000) $ 571,000 207,000 (100,000) $ 432,000 Balance Sheets $ 39,000 $ 13,000 129,500 Cash Accounts Receivable 125,000 Inventory Investment in Sub Inc. (cost) 180,000 810,000 150,000 Patents 200,000 Buildings (net) Equipment (net) Land 250,000 100,000 300,000 75,000 50,000 $ 1,037,500 75,000 $ 1,579,000 Total Assets Current Liabilities 183,000 115,500 Long term debt 225,000 140,000 Common Shares 600,000 350,000 Retained Earnings Total Liabilities and Equity 571,000 $ 1,579,000 432,000 S 1,037,500 Required: a. Prepare the following December 31, 2020 consolidated financial statements: Income statement, Statement of Financial Position, and Statement of Retained Earnings. Note: You must provide all supporting calculations and schedules. The statements must be in their correct form. b. Assume that Par had used the equity method to account for its investment in Sub. Calculate the Investment in Sub at December 31, 2020. Label work and show supporting calculations.
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Related Book For
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Posted Date:
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