The following financial statements were prepared on December 31, Year 6. BALANCE SHEET Parent Subsid Cash $
Question:
The following financial statements were prepared on December 31, Year 6.
BALANCE SHEET | |||||||
Parent | Subsid | ||||||
Cash | $ | 480,000 | $ | 280,000 | |||
Accounts receivable | 380,000 | ||||||
Inventory | 2,900,000 | 600,000 | |||||
Plant and equipment | 3,900,000 | 4,490,000 | |||||
Accumulated depreciation | (930,000 | ) | (490,000 | ) | |||
Investment in Subsid Company (at cost) | 4,200,000 | ||||||
$ | 10,930,000 | $ | 4,880,000 | ||||
Liabilities | $ | 584,000 | $ | 786,000 | |||
Common shares | 4,650,000 | 2,500,000 | |||||
Retained earnings | 5,696,000 | 1,594,000 | |||||
$ | 10,930,000 | $ | 4,880,000 | ||||
INCOME STATEMENT | |||||
Sales | $ | 4,900,000 | $ | 1,900,000 | |
Dividend income | 304,000 | ||||
5,204,000 | 1,900,000 | ||||
Cost of sales | 2,680,000 | 580,000 | |||
Miscellaneous expenses | 410,000 | 88,000 | |||
Administrative expense | 98,000 | 28,000 | |||
Income tax expense | 340,000 | 210,000 | |||
(3,528,000) | (906,000) | ||||
Net income | $ | 1,676,000 | $ | 994,000 | |
RETAINED EARNINGS STATEMENT | |||||
Balance, January 1 | $ | 4,700,000 | $ | 980,000 | |
Net income | 1,676,000 | 994,000 | |||
6,376,000 | 1,974,000 | ||||
Dividends | (680,000) | (380,000) | |||
Balance, December 31 | $ | 5,696,000 | $ | 1,594,000 | |
Additional Information
Parent purchased 80% of the outstanding voting shares of Subsid for $4,200,000 on July 1, Year 2, at which time Subsid’s retained earnings were $490,000, and accumulated depreciation was $78,000. The acquisition differential on this date was allocated as follows:
- 20% to undervalued inventory
- 40% to equipment—remaining useful life 8 years
- Balance to goodwill
During Year 3, a goodwill impairment loss of $88,000 was recognized, and an impairment test conducted as at December 31, Year 6, indicated that a further loss of $38,000 had occurred.
Subsid owes Parent $93,000 on December 31, Year 6.
Please note: Amortization expenses are grouped with cost of goods sold account and impairment losses are grouped with administrative expenses.
Required:
- Prepare consolidated financial statements on December 31, Year 6, including Income Statement, Retained Earnings Statement and Balance Sheet (use Direct Approach)
- Include the following calculations
1) Acquisition Differential and Goodwill amounts
2) Acquisition Differential amortization from year 2 to year 6.
3) Consolidated income with attributable to Parent’s shareholders and NCI
4) Consolidated Retained Earnings calculation
5) Calculation of NCI amount for Balance Sheet
Modern Advanced Accounting In Canada
ISBN: 9781259066481
7th Edition
Authors: Hilton Murray, Herauf Darrell