On May 1, 2013, Peat Co. purchased all of Sorbet Ltd.'s issued common shares for $630,000. At the acquisition date, Sorbet's financial statements included the following balances:
Share capital......................................$400,000
Retained earnings.................................210,000
Goodwill.............................................10,000
At the acquisition date, Sorbet's identifiable assets and liabilities were equal to their fair values, except in the case of inventory that had a book value of $80,000 and a fair value of $86,000, and equipment that had a book value of $360,000 and a fair value of $370,000. The equipment was originally purchased for $480,000. At the acquisition date, the equipment had a remaining useful life of 5 years and was amortized using the straight-line method. All the inventory that Sorbet had on hand at the acquisition date was sold by October 2013. Sorbet's goodwill has not shown indications of impairment. Both Peat and Sorbet have April 30th year-ends and did not have any intercompany sales with each other.
The financial statements for Peat and Sorbet at April 30, 2015.
Statement of Financial Position
April 30, 2015
Peat Co. Sorbet Ltd.
Assets:
Current assets:
Cash.....................................................$ 52,000.....................$ 161,600
Accounts receivable....................................100,000.........................80,000
Inventory....................................................120,000........................170,000
Total Current assets....................................272,000........................411,600
Non-current assets:
Equipment, net...........................................558,000........................368,000
Furniture and fixtures, net..............................51,000.........................51,600
Investment in Sorbet Ltd.............................630,000................................-
Goodwill..................................................___-___.........................10,000
Total non-current....................................1,239,000........................429,600
Total assets...........................................$ 1,511,000.....................$ 841,200
Liabilities and shareholders' equity:
Current liabilities:
Accounts payable.....................................$ 69,000.......................$ 19,600
Non-current liabilities:
Loan payable................................................22,000.........................32,000
Total liabilities..............................................91,000.........................51,600
Shareholders' equity:
Share capital............................................1,000,000........................400,000
Retained earnings.......................................420,000........................389,600
Total equity..............................................1,420,000........................789,600
Total liabilities and shareholders' equity.......$ 1,511,000......................$ 841,200
Condensed Statement of Income
For the year ended April 30, 2015
Peat Co.
Retained earnings, May 1, 2014....................340,000.........................339.600
Net income..............................................80,000..........................50,000 Sorbet Ltd.
Sales..................................................$ 250,000......................$ 180,000
Expenses...............................................170,000.........................130,000
Net income...........................................$ 80,000.........................$ 50,000
Statement of Changes in Equity
For the year ended April 30, 2015
Peat Co. Sorbet Ltd.
Share capital.....................................$ 1,000,000.........................$ 400,000
Retained earnings, April 30, 2015.................420,000...........................389,600
Total shareholders' equity.....................$ 1,420,000.........................$ 789,600
Required:
Prepare Peat's consolidated financial statements for April 30, 2015. Ignore income taxes.