Attached is a worksheet containing the financial statements for Parrot for the year ending December 31, 2022;
Question:
Attached is a worksheet containing the financial statements for Parrot for the year ending December 31, 2022; for its two 80%-owned subsidiaries, Sumone and Sumother, on December 31, 2022, and for the year ending December 31, 2022; and the six months from June 30 to December 31, 2022, respectively.
Parrot acquired Sumone on January 1, 2019, for $64,000. At that date, Sumone's stockholders' equity comprised:
Common stock | $20,000 |
Paid-in capital | $13,000 |
Retained earnings | $22,000 |
Sumone's inventory (book value $20,000 - fair value $25,000) and plant (the book value cost $50,000 less accumulated depreciation $10,000 - fair value $55,000) were the only assets that required revaluation at acquisition. The plant's 10-year remaining helpful life from the acquisition date is still owned. The inventory was sold in 2020. Goodwill, if any, since that date does not require impairment. The value of the noncontrolling interest at the acquisition date was determined to be $15,000.
Parrot acquired Sumother on June 30, 2022, for $94,000 cash. On the acquisition date, Sumother's balance sheet was shown in the worksheet provided to you. The only asset of Sumother that had a value different from its book value was the inventory, which had a fair value of $40,000. Half of this inventory was sold by December 31, 2022, and the balance is on hand. Goodwill, if appropriate, has also been unimpaired since that date. In this acquisition, the noncontrolling interest was valued at $23,000.
On January 1, 2021, Parrot sold the plant to Sumone for $120,000. This plant had originally cost Parrot $140,000 and had accumulated depreciation of $40,000 at the date of disposal to Sumone. The plant had a five-year remaining helpful life from the date of transfer.
Someone sells goods to other group members. Inventory sales by Sumone to Parrot in 2022 were $40,000. Of these, $16,000 were unsold on December 31, 2022. There were $20,000 of goods held in Parrot's inventory on January 1, 2022, arising from prior-year purchases from Sumone. These were all sold outside the group in the current year. Someone uses a one-third markup on cost for all sales.
The unpaid inter-entity balances due to Sumone from Parrot included in receivables and payables relating to the inventory sales were $10,000 on December 31, 2022, and $5,000 on December 31, 2021.
In this question, all aspects of taxation may be ignored.
Parrot has used the cost (original value) method to account for its investments in the attached worksheets.
PART 1
REQUIRED
- On the first worksheet, complete a consolidated balance worksheet for Parrot and its subsidiary on December 31, 2021.
Simone
Balance sheets December 31, 2021 | |||||
Parrot | Simone | Consolidated | |||
12/31/21 | 12/31/21 | 12/31/21 | |||
Cash | 70,000 | 30,000 | |||
Accounts receivable | 94,220 | 45,000 | |||
Inventory | 44,880 | 51,950 | |||
Investments in subsidiary | 64,000 | - | |||
Plant and equipment net | 75,000 | 140,000 | |||
348,100 | 266,950 | ||||
Accounts payable | 50,000 | 81,800 | |||
Accrued liabilities | 19,000 | 2,150 | |||
Long term debt | 140,000 | 80,000 | |||
- | |||||
- | |||||
Common stock | 30,000 | 20,000 | |||
Paid in capital | 24,000 | 13,000 | |||
- | |||||
Retained earnings | 85,100 | 70,000 | |||
- | |||||
- | |||||
- | |||||
348,100 | 266,950 |
Smother:
Investments |
- |
Plant and equipment | 160,000 |
less accumulated depreciation | (30,000) |
207,000 | |
Accounts payable | 42,000 |
Accrued liabilities | - |
Long term debt | 75,000 |
Common stock | 30,000 |
Paid in capital | 40,000 |
Retained earnings | 20,000 |
207,000 |
- Determine, by any means you wish, the figures that would be reported for the Parrot Group in the 2022 consolidated balance sheet, consolidated income statement, and statement of stockholders' equity. (An adequately classified set of financial statements is required with disclosure of the noncontrolling interest. Comparative figures should be included for the balance sheet but are not necessary for the other words. Simone.)
December 31, 2022 | ||||||
Year | Year | June - Dec | ||||
Parrot | Sumone | SmotherLess | CONSOLIDATED | |||
Income statement | ||||||
Revenues | 96,000 | 152,800 | 121,000 | |||
less Cost of Sales | (55,250) | (96,400) | (65,000) | |||
40,750 | 56,400 | 56,000 | - | |||
less Expenses: | ||||||
Depreciation | (5,500) | (20,000) | (10,000) | |||
Other expenses | (22,650) | (20,400) | (15,200) | |||
(28,150) | (40,400) | (25,200) | - | |||
Operating income | 12,600 | 16,000 | 30,800 | - | ||
Interest expense | (12,000) | (4,000) | (4,000) | |||
Investment IncomeSimoneSmother | 4,000 | - | - | |||
Net income | 4,600 | 12,000 | 26,800 | - | ||
Retained earnings statement | ||||||
Parrot | Sumone | Sumother | ||||
Retained earnings start | 85,100 | 70,000 | 20,000 | |||
Net income | 4,600 | 12,000 | 26,800 | |||
less Dividends paid | (10,000) | (5,000) | ||||
Retained earnings 12/31 | 79,700 | 82,000 | 41,800 | - | ||
Balance sheet | Parrot | Simone | Smother | |||
Cash | 26,900 | 35,000 | 1,000 | |||
Accounts receivable | 30,000 | 40,000 | 45,800 | |||
Inventory | 46,000 | 52,000 | 70,000 | |||
Investments | 158,000 | - | - | |||
Plant and equipment net | 80,000 | 128,000 | 160,000 | |||
340,900 | 255,000 | 276,800 | - | |||
Accounts payable | 57,200 | 61,000 | 84,000 | |||
Accrued liabilities | 30,000 | 9,000 | 11,000 | |||
Long term debt | 120,000 | 70,000 | 70,000 | |||
Common stock | 30,000 | 20,000 | 30,000 | |||
Paid in capital | 24,000 | 13,000 | 40,000 | |||
Retained earnings | 79,700 | 82,000 | 41,800 | |||
Noncontrolling interest | ||||||
340,900 | 255,000 | 276,800 | - |
Modern Advanced Accounting In Canada
ISBN: 9781259066481
7th Edition
Authors: Hilton Murray, Herauf Darrell