Assignment $-$ Show all calculations for partial credit

Chapter $5$ Problem: $($hint: like Palm and Storm; use your class notes chapter postings and the

video for this question for support.$)$

On December $31,$ Year $2,$ P Inc. purchased $80\%$ of the outstanding ordinary shares of S Com$-$

pany for $$310,000.$ At that date, $S$ had ordinary shares of $$200,000$ and retained earnings of

$$60,000.$ In negotiating the purchase price, it was agreed that the assets on S$\text{'}$s statement of

financial position were fairly valued except for plant assets, which had a $$40,000$ excess of fair

value over carrying amount. It was also agreed that $S$ had unrecognized intangible assets

consisting of trademarks that had an estimated value of $$24,000.$ The plant assets had a

remaining useful life of eight years at the acquisition date and the trademarks would be

amortized over a $12-$year period. Any goodwill arising from this business combination would be

tested periodically for impairment. P accounts for its investment using the cost method.

Additional Information:

At December $31,$ Year $6,$ an impairment test of S$\text{'}$s goodwill revealed its recoverable amount

is $$50,000$

An impairment test indicated that the trademarks had a recoverable amount of $$13,750.$

The impairment loss on these assets $($goodwill and trademarks$)$ occurred entirely in Year $6.$

On December $26,$ Year $6,$ P declared dividends of $$36,000,$ while $S$ declared dividends of

$$20,000.$

Amortization expense is reported in selling expenses, while impairment losses are reported

in other expenses.

Financial statements for $P$ and $S$ for the year ended December $31,$ Year $6,$ were as follows:

STATEMENTS OF FINANCIAL POSITION

December $31,$ Year $6$

$P$

S

Assets

Plant assets$-$

net

Investment in

Storm

Other

investments

$82,000$

$22,000$

Notes

receivable

Inventory

Accounts

receivable

Cash

$20,000$

$30,000$

$ $830,000$

$ $562,000$Required:

a$)$ Calculate the acquisition differential, goodwill and non$-$controlling interest at acquisition

date, December $31,$ Year $2.$ Prepare the acquisition eliminating entry at acquisition date on

the consolidation worksheet.

b$)$ Prepare the schedule of amortization of acquisition differential and impairment$)$

c$)$ Calculate consolidated net income for the year ended December $31,$ Year $6.$ Separate the

portion attributable to $P$ and to non$-$controlling interest.

d$)$ Prepare the consolidated income statement for year $6.$ Show attribution to each

shareholder group.

e$)$ Calculate the ending balance of consolidated retained earnings at December $31,$ Year $6.$

f$)$ Calculate the ending balance of non$-$controlling interest that would appear on the

consolidated balance sheet at December $31,$ Year $6$g$)$ Calculate the balance of "Plant Assets @ net" that would show on the consolidated balance

sheet at December $31,$ Year $6.$

h$)$ Calculate the balance of ordinary $($common$)$ shares on the consolidated balance sheet at

December $31,$ Year $6.$

i$)$ Assume that $P$ used the equity method to record its investment in $S.$ What would be the

value of the Investment in S account on the P$\text{'}$s separate entity balance sheet at December

$31,$ Year $6.$

Check Figures:

Consolidated Net income before attribution $=107,250$

Interest and Dividend income: $20,000$

Consolidated RE at Dec $31,$ year $6=147,000($hint: start with ending RE of each separate

entity$)$

$,NCl$ at Dec $31,$ year $6=86,750$

Chapter $6$: $($hint: like PAT and SAT; use your class notes chapter postings and the video for

this question for support.$)$

On January $1,$ Year $2022,$ Patti Ltd$.$ acquired $70\%$ of Sammi Inc. when Sammi's retained

earnings were $$1,000,000.$ There was no acquisition differential. Patti accounts for its

investment under the cost method.

Sammi sells inventory to Patti on a regular basis at a markup of $25\%$ of selling price. The

intercompany sales were $$160,000$ in Year $2022$ and $$190,000$ in Year $2023.$ The total

amount owing by Patti related to these intercompany sales was $$60,000$ at the end of Year

$2022$ and $$50,000$ at the end of Year $2023.$

On January $1,$ Year $2023,$ the inventory of Patti contained goods purchased from Sammi

amounting to $$70,000,$ while the December $31,$ Year $2023,$ inventory contained goods

purchased from SAT amounting to $$80,000\frac{?}{?}<$