Financial statements of Par Corp. and its subsidiary Star Inc. on December 31, Year 12, are...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Financial statements of Par Corp. and its subsidiary Star Inc. on December 31, Year 12, are shown below: BALANCE SHEETS At December 31, Year 12 Cash Accounts receivable Inventories Land Plant and equipment Accumulated depreciation Investment in Star common shares Accounts payable Accrued liabilities Preferred shares Common shares Retained earnings Par Star $ 55,000 $ 115,000 2,500 100,000 84,600 63,000 45,000 85,000 500,000 850,000 (195,000) (315,000) 229,600 $ 834,200 $ 785,500 $ 98,000 $ 195,000 9,500 13,000 - 65,000 450,000 170,000 276,700 342,500 $ 834,200 $ 785,500 RETAINED EARNINGS STATEMENTS For the Year Ended December 31, Year 12 Star Par $286,700 $403,500 29,000 (26,000) Balance, January 1 Net income (loss) Dividends Balance, December 31 315,700 377,500 (39,000) (35,000) $276,700 $342,500 Other Information On January 1, Year 5, the balance sheet of Star showed the following shareholders' equity: $8 cumulative preferred shares, 500 shares issued Common shares, 2,000 shares issued. Deficit (Note 1) $ 65,000 170,000 (95,000) $140,000 Note 1: Dividends on preferred shares are two years in arrears. On this date, Par acquired 1,400 common shares of Star for a cash payment of $229,600. The fair values of Star's identifiable net assets differed from carrying amounts only with respect to the following: Accounts receivable Inventory Plant Carrying amount $ 49,000 59,000 570,000 Fair value $ 47,000 66,000 620,000 Long-term liabilities. 328,000 348,000 The plant had an estimated remaining useful life of five years on this date, and the long-term liabilities had a maturity date of December 30, Year 12. Any goodwill is to be tested annually for impairment. Both Par and Star make substantial sales to each other at an intercompany selling price that yields the same gross profit as the sales they make to unrelated customers. Intercompany sales in Year 12 were as follows: Par to Star Star to Par $ 340,000 375,000 During Year 12, Par billed Star $2,000 per month in management fees. At year-end, Star had paid for all months except for December. The January 1, Year 12, inventories of the two companies contained unrealized intercompany profits as follows: Inventory of Par Inventory of Star $ 29,000 28,000 The December 31, Year 12, inventories of the two companies contained unrealized intercompany profits as follows: Inventory of Par Inventory of Star $ 50,000 52,000 On July 1, Year 7, Star sold equipment to Par for $74,000. The equipment had a carrying amount in the records of Star of $54,000 on this date and an estimated remaining useful life of five years. Goodwill impairment losses were recorded as follows: Year 7, $82,000; Year 9, $50,970; and Year 12, $20,460. Assume a 40% corporate tax rate. Par has accounted for its investment in Star by the cost method. All dividends in arrears were paid by December 31, Year 11. Required: (a) Prepare, with all necessary calculations, the following: (i) Year 12 consolidated retained earnings statement. (Input all amounts as positive values. Omit $ sign in your response.) Par Corp. Consolidated Retained Earnings Statement Year Ended December 31, Year 12 Balance January 1 Net loss Dividends $ Balance December 31 $ (ii) Consolidated balance sheet as at December 31, Year 12. Assets Par Corp. Consolidated Balance Sheet as at December 31, Year 12 $ 0 Liabilities and Equity $ 0 (b) How would the return on equity attributable to Par's shareholders for Year 12 change if Star's preferred shares were non-cumulative instead of cumulative? No Change O Change (c) On January 1, Year 13, Star issued common shares for $100,000 in cash. Because Par did not purchase any of these shares, Par's ownership percentage declined from 70 to 56 %. Calculate the gain or loss that would be charged or credited to consolidated shareholders' equity as a result of this transaction. (Input all amounts as positive values. Round intermediate calculations and final answer to nearest dollar amount. Omit $ sign in your response.) (Click to select) Financial statements of Par Corp. and its subsidiary Star Inc. on December 31, Year 12, are shown below: BALANCE SHEETS At December 31, Year 12 Cash Accounts receivable Inventories Land Plant and equipment Accumulated depreciation Investment in Star common shares Accounts payable Accrued liabilities Preferred shares Common shares Retained earnings Par Star $ 55,000 $ 115,000 2,500 100,000 84,600 63,000 45,000 85,000 500,000 850,000 (195,000) (315,000) 229,600 $ 834,200 $ 785,500 $ 98,000 $ 195,000 9,500 13,000 - 65,000 450,000 170,000 276,700 342,500 $ 834,200 $ 785,500 RETAINED EARNINGS STATEMENTS For the Year Ended December 31, Year 12 Star Par $286,700 $403,500 29,000 (26,000) Balance, January 1 Net income (loss) Dividends Balance, December 31 315,700 377,500 (39,000) (35,000) $276,700 $342,500 Other Information On January 1, Year 5, the balance sheet of Star showed the following shareholders' equity: $8 cumulative preferred shares, 500 shares issued Common shares, 2,000 shares issued. Deficit (Note 1) $ 65,000 170,000 (95,000) $140,000 Note 1: Dividends on preferred shares are two years in arrears. On this date, Par acquired 1,400 common shares of Star for a cash payment of $229,600. The fair values of Star's identifiable net assets differed from carrying amounts only with respect to the following: Accounts receivable Inventory Plant Carrying amount $ 49,000 59,000 570,000 Fair value $ 47,000 66,000 620,000 Long-term liabilities. 328,000 348,000 The plant had an estimated remaining useful life of five years on this date, and the long-term liabilities had a maturity date of December 30, Year 12. Any goodwill is to be tested annually for impairment. Both Par and Star make substantial sales to each other at an intercompany selling price that yields the same gross profit as the sales they make to unrelated customers. Intercompany sales in Year 12 were as follows: Par to Star Star to Par $ 340,000 375,000 During Year 12, Par billed Star $2,000 per month in management fees. At year-end, Star had paid for all months except for December. The January 1, Year 12, inventories of the two companies contained unrealized intercompany profits as follows: Inventory of Par Inventory of Star $ 29,000 28,000 The December 31, Year 12, inventories of the two companies contained unrealized intercompany profits as follows: Inventory of Par Inventory of Star $ 50,000 52,000 On July 1, Year 7, Star sold equipment to Par for $74,000. The equipment had a carrying amount in the records of Star of $54,000 on this date and an estimated remaining useful life of five years. Goodwill impairment losses were recorded as follows: Year 7, $82,000; Year 9, $50,970; and Year 12, $20,460. Assume a 40% corporate tax rate. Par has accounted for its investment in Star by the cost method. All dividends in arrears were paid by December 31, Year 11. Required: (a) Prepare, with all necessary calculations, the following: (i) Year 12 consolidated retained earnings statement. (Input all amounts as positive values. Omit $ sign in your response.) Par Corp. Consolidated Retained Earnings Statement Year Ended December 31, Year 12 Balance January 1 Net loss Dividends $ Balance December 31 $ (ii) Consolidated balance sheet as at December 31, Year 12. Assets Par Corp. Consolidated Balance Sheet as at December 31, Year 12 $ 0 Liabilities and Equity $ 0 (b) How would the return on equity attributable to Par's shareholders for Year 12 change if Star's preferred shares were non-cumulative instead of cumulative? No Change O Change (c) On January 1, Year 13, Star issued common shares for $100,000 in cash. Because Par did not purchase any of these shares, Par's ownership percentage declined from 70 to 56 %. Calculate the gain or loss that would be charged or credited to consolidated shareholders' equity as a result of this transaction. (Input all amounts as positive values. Round intermediate calculations and final answer to nearest dollar amount. Omit $ sign in your response.) (Click to select)
Expert Answer:
Answer rating: 100% (QA)
Answer a i Consolidated Retained Earnings Statement Par Corp Consolidated Retained Earnings Statement Year Ended December 31 Year 12 Amount Balance Ja... View the full answer
Related Book For
Modern Advanced Accounting in Canada
ISBN: 978-1259087554
8th edition
Authors: Hilton Murray, Herauf Darrell
Posted Date:
Students also viewed these accounting questions
-
Financial statements of Par Corp. and its subsidiary Star Inc. on December 31, Year 12, are shown below: Other Information ¢ On January 1, Year 5, the balance sheet of Star showed the following...
-
Physical Science the table shows equivalent Fahrenheit and Celsius temperatures. Degrees Fahrenheit Degrees Celsius 32 ................... 0 68 ................. 20 104 ................. 40 140...
-
Find a diagonalizable matrix A such that D + A is not diagonalizable. If 0 -1
-
In Exercises, find the indefinite integral and check the result by differentiation. EX xp (1 + x)
-
What would happen to the SML graph in Figure 8.8 if expected inflation increased or decreased? Figure 8.8 268 269 270 271 272 273 274 275 A Required Rate of Return TH-13.0% SML: r, RF+RPM * b D E F H...
-
Forney Company maintains a petty cash fund for small expenditures. The following transactions occurred over a 2-month period. July 1 Established petty cash fund by writing a check on Scranton Bank...
-
Jane has been offered a research consultancy job to study the impact of inequality of poverty in five SADC countries of her choice. As her former classmate, Jane has asked you to help advise her on...
-
Accounting records from Division A of Alpha Manufacturing Company (an investment center, where performance is measured using Economic Value Added) indicate the following: Divisional Sales $1,500,000...
-
The US Department of Homeland Security (DHS) Doctrine defines internal risks as follows Financial stewardship Malicious activity in cyberspace Personnel reliability Systems reliability
-
2. A wind farm off the cost of Scotland consists of 60 wind turbines, each expected to generate 3 MW of electrical energy when the wind speed is between 15-25 m/s (at gale strength), with a standard...
-
Describe each of the research methods questionary, interviews, observation, and documents and images and when it might be best to employ it, from Martyn Denscombe's book.
-
How do facilities ensure their cost management practices align with regulatory requirements?
-
What mechanisms can organizations implement to ensure ethical behavior and social responsibility among their employees? Explain
-
Braker manufacturing has a target of carrying closing monthly inventory equal to fifteen percent of next month's projected sales. If the current month's beginning inventory is 8,000 units and it...
-
Consider the sections of two circuits illustrated above. Select True or False for all statements.After connecting a and b to a battery, the voltage across R1 always equals the voltage across R2.Rcd...
-
The deletion rules for enforcing referential integrity include both Delete. Cascade and Delete Restrict In general, what criteria should a DBA use in deciding whether to use a Delete: Cascade or...
-
What is metadata? if database administrators need to define metadata, what kind of language should they use (DDL or DML)? Why?
-
What is a relational database?
Study smarter with the SolutionInn App