On January 2, Year 5, Road Ltd. acquired 70% of the outstanding voting shares of Runner...

 

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On January 2, Year 5, Road Ltd. acquired 70% of the outstanding voting shares of Runner Ltd. The acquisition differential of $440,000 on that date was allocated in the following manner: $140,000 90,000 100,000 40,000 Inventory Land Plant and equipment Estimated life 5 years Patent Estimated life 8 years Goodwill 70,000 $440,000 The Year 9 income statements for the two companies were as follows: Road Runner Sales $4,400,000 207,900 $2,140,000 Intercompany investment income Rental revenue 150,000 2,290,000 Total income Materials used in manufacturing 4,607,900 2,200,000 Changes in work-in-progress and finished goods inventory Employee benefits Interest expense Depreciation 85,000 590,000 290,000 445,000 840,000 (10,000) 520,000 180,000 265,000 45,000 Patent amortization Rental expense 75,000 340,000 Income tax 189,200 Total expenses 4,025,000 2,029,200 Profit $ 582,900 $ 260,800 Additional Information • Runner regularly sells raw materials to Road. Intercompany sales in Year 9 totalled $460,000. Intercompany profits in the inventories of Road were as follows: January 1, Year 9 December 31, Year 9 $187,000 80,000 • Road's entire rental expense relates to equipment rented from Runner. A goodwill impairment loss of $3,000 occurred in Year 9. • Retained earnings at December 31, Year 9, for Road and Runner were $2,526,100 and $1,190,000, respectively. • Road uses the equity method to account for its investment, and uses income tax allocation at the rate of 40% when it prepares consolidated statements. Required: (a) Prepare a consolidated income statement for Year 9 with expenses classified by nature. (Input all amounts as positive number except for Change in work-in-progress and finished goods inventory that must be entered with appropriate sign. Omit $ sign in your response.) Road Ltd. Consolidated Income Statement for the Year Ended December 31, Year 9 Sales 2$ Rental revenue Total income Materials used in manufacturing Change in work-in-progress and finished goods inventory Employee benefits Interest expense Depreciation Patent amortization Goodwill impairment loss Income tax Total expenses Profit Attributable to: Shareholders of Road Non-controlling interests (b) Calculate consolidated retained earnings at December 31, Year 9. (Omit $ sign in your response.) Consolidated retained earnings On January 2, Year 5, Road Ltd. acquired 70% of the outstanding voting shares of Runner Ltd. The acquisition differential of $440,000 on that date was allocated in the following manner: $140,000 90,000 100,000 40,000 Inventory Land Plant and equipment Estimated life 5 years Patent Estimated life 8 years Goodwill 70,000 $440,000 The Year 9 income statements for the two companies were as follows: Road Runner Sales $4,400,000 207,900 $2,140,000 Intercompany investment income Rental revenue 150,000 2,290,000 Total income Materials used in manufacturing 4,607,900 2,200,000 Changes in work-in-progress and finished goods inventory Employee benefits Interest expense Depreciation 85,000 590,000 290,000 445,000 840,000 (10,000) 520,000 180,000 265,000 45,000 Patent amortization Rental expense 75,000 340,000 Income tax 189,200 Total expenses 4,025,000 2,029,200 Profit $ 582,900 $ 260,800 Additional Information • Runner regularly sells raw materials to Road. Intercompany sales in Year 9 totalled $460,000. Intercompany profits in the inventories of Road were as follows: January 1, Year 9 December 31, Year 9 $187,000 80,000 • Road's entire rental expense relates to equipment rented from Runner. A goodwill impairment loss of $3,000 occurred in Year 9. • Retained earnings at December 31, Year 9, for Road and Runner were $2,526,100 and $1,190,000, respectively. • Road uses the equity method to account for its investment, and uses income tax allocation at the rate of 40% when it prepares consolidated statements. Required: (a) Prepare a consolidated income statement for Year 9 with expenses classified by nature. (Input all amounts as positive number except for Change in work-in-progress and finished goods inventory that must be entered with appropriate sign. Omit $ sign in your response.) Road Ltd. Consolidated Income Statement for the Year Ended December 31, Year 9 Sales 2$ Rental revenue Total income Materials used in manufacturing Change in work-in-progress and finished goods inventory Employee benefits Interest expense Depreciation Patent amortization Goodwill impairment loss Income tax Total expenses Profit Attributable to: Shareholders of Road Non-controlling interests (b) Calculate consolidated retained earnings at December 31, Year 9. (Omit $ sign in your response.) Consolidated retained earnings