On July 1, 2012, Norilsk acquired 90% of the capital of Rudny for $290,160. The equity of Rudny at this date consisted of:

Share capital............. $200,000

Retained earnings............. 80,000

The carrying amounts and fair values of the assets and liabilities recorded by Rudny at July 1, 2012, were as follows:

Additional information:
1. The machinery and equipment have a further 10-year life, benefits to be received evenly over this period. Norilsk uses the partial goodwill method.
2. The tax rate is 30%. All inventory on hand at July 1, 2012, is sold by June 30, 2013.
3. On July 1, 2013, Norilsk sold a 10% interest in Rudny for $30,000.
Required
(a) What are the adjustments for the consolidated financial statements if prepared immediately after July 1, 2012?
(b) What are the adjustments for the consolidated financial statements if prepared at June 30, 2013? Assume a profit for Rudny for the 2012€“13 period of $20,000.
(c) If the non-controlling interest had a fair value of $31,800 on July 1, 2012, and the full goodwill method had been used, what adjustments in parts (a) and (b) above would change? Prepare the changed adjustments.
(d) What is the effect on equity of the sale of shares on July 1, 2013?

Transcribed Image Text:

Carrying amount Fair value Equipment Land Inventory Machinery (net) Liabilities 事20,000 90,000 10,000 200,000 40,000 20,000 100,000 12,000 220,000 40,000