Question

The following are the Year 9 income statements of Kent Corp. and Laurier Ltd.
Additional Information
• Kent acquired its 40% interest in the common shares of Laurier in Year 3 at a cost of $825,000 and uses the cost method to account for its investment for internal record keeping.
• The acquisition-differential amortization schedule pertaining to Kent’s 40% interest showed the following write-off for Year 9:
Buildings................ $9,000
Goodwill impairment loss.......... 13,000
.................... 22,000
Long-term liabilities............ 12,500
Acquisition-differential amortization—Year 9... $9,500
• Depreciation expense and goodwill impairment loss are included with selling and administrative expenses.
• In Year 9, rent amounting to $125,000 was paid by Laurier to Kent. Kent has recorded this as other income.
• In Year 6, Kent sold land to Laurier and recorded a profit of $75,000 on the transaction. During Year 9, Laurier sold 30% of the land to an unrelated land development company.
• During Year 9, Laurier paid dividends totalling $80,000.
• It has been established that Kent’s 40% interest would not be considered control in accordance with IFRSs.
• Assume a 40% tax rate.
Required:
(a) Assume that Kent is a public company and Laurier is a joint venture that is owned by Kent and two other unrelated venturers. Also assume that Kent acquired its interest after Laurier’s initial formation, and that the acquisition differentials are therefore valid. Prepare the income statement of Kent for Year 9 using the equity method (show all calculations).
*(b) Assume that Kent is a private company and Laurier is a joint venture. Prepare Kent’s consolidated income statement for Year 9 using proportionate consolidation. (Show all calculations.)


$1.99
Sales1
Views92
Comments0
  • CreatedJune 08, 2015
  • Files Included
Post your question
5000