On January 1, 20X6, Parent Ltd. purchased 100% of the outstanding voting common shares of Sub Ltd. for $1,400,000. The depreciable assets of Sub have a future useful life of 10 years and are being depreciated using straight-line depreciation.

During 20X6, the following events occurred:
1. Neither Parent nor Sub paid any dividends.

2. Sub Ltd. sold inventory costing $247,000 to Parent Ltd. for $341,000, 30% of which was not sold at year-end.

3. All of the current assets of Sub at the time of acquisition were sold to outside parties or were collected.

4. Parent Ltd. uses the cost method to record the investment in Sub. Condensed trial balance information for Sub Ltd. and Parent Ltd. is shown below.

Required
Prepare a consolidated statement of comprehensive income and retained earnings and a consolidated statement of financial position for Parent Ltd. for the year ended December 31, 20X6.

Parent Ltd. Pre-closing Trial Balance December 31, 20X6
Cash..............................................................................$ 137,500
Accounts receivable, net...............................................192,000
Marketable securities......................................................64,500
Inventory........................................................................430,000
Land................................................................................365,000
Buildings and equipment, net.....................................431,000
Goodwill*.........................................................................70,000
Investment in Sub Ltd...............................................1,400,000
..................................................................................$ 3,090,000
Current liabilities.......................................................$ 197,500
Bonds payable..............................................................342,500
Common shares...........................................................550,000
Retained earnings.....................................................1,878,500
Sales...............................................................................965,000
Cost of goods sold.....................................................(731,500)
Depreciation.................................................................(13,500)
Other expenses..........................................................(101,725)
Bond interest income......................................................3,225
.................................................................................$ 3,090,000

Transcribed Image Text:

Post-closing trial balance January 1, 20X6 $ 92,500 Pre-closing trial balance December 31, 20X6 Falr market value January 1, 20X6 $ 92,500 %24 Cash 67,500 216,000 Accounts receivable, net 225,000 192,500 Inventory 345,000 365,000 365,000 Land 255,000 285,000 255,000 Buildings and equipment, net 487,000 425,000 481,500 Goodwill 55,000 55,000 $ 1,416,500 $ 155,000 $1,450,500 $ 160,000 $ 160,000 Current liabilities Bonds payable, 10% 107,500 107,500 107,500 Common shares 200,000 200,000 Retained earnings 983,000 983,000 Sales 715,000 Cost of goods sold Depreciation (433,500) (5,500) Other expenses (294,250) Bond interest expense (10,750) $1,450,500 $1,416,500