Consider how the SCI and SFP for Black would differ from the statements provided if Black reported its investment in White on an equity basis. Determine the following:

• Sales
• Dividend income
• Cost of sales
• Depreciation expense
• Income tax expense
• Other expenses
• Equity in White's earnings
• Retained earnings, December 31, 2019
• Dividends
• Retained earnings, December 31, 2020
• Cash
• Accounts and other receivable
• Inventories
• Building and equipment
• Accumulated depreciation
• Investment in White
• Other investments
• Accounts and other payables
• Deferred income taxes
• Common shares
   
   
   

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On January 4, 2020, Black Corporation acquired 100% of the outstanding shares of White Inc by a share-for-share exchange of its own shares, valued at $1,800,000. The statements of financial position of both companies just prior to the share exchange are as follows: Statement of Financial Position December 31, 2019 Black White $ 80,000 120,000 Cash $ 100,000 Accounts and other receivables 50,000 150,000 800,000 400,000 120,000 $ 870,000 Inventories Building and equipment Accumulated depreciation Deferred charges 110,000 1,600,000 800,000 $ 1,060,000 $ 80,000 300,000 30,000 250,000 Accounts and other payables Bonds payable $ 150,000 Deferred income taxes 60,000 750,000 Common shares Retained earnings 100,000 $ 1,060,000 210,000 $ 870,000 White had patents, not shown on the SFP, that had an estimated fair value of $225,000 and an estimated remaining productive life of 5 years. White's building and equipment had an estimated fair value of $100,000 in excess of carrying value, and the deferred charges were assumed to have a fair value of zero. White's buildings and equipment are being depreciated on the straight-line basis and have a remaining useful life of 20 years. The deferred charges are being amortized over 4 years. On January 4, 2020, Black Corporation acquired 100% of the outstanding shares of White Inc by a share-for-share exchange of its own shares, valued at $1,800,000. The statements of financial position of both companies just prior to the share exchange are as follows: Statement of Financial Position December 31, 2019 Black White $ 80,000 120,000 Cash $ 100,000 Accounts and other receivables 50,000 150,000 800,000 400,000 120,000 $ 870,000 Inventories Building and equipment Accumulated depreciation Deferred charges 110,000 1,600,000 800,000 $ 1,060,000 $ 80,000 300,000 30,000 250,000 Accounts and other payables Bonds payable $ 150,000 Deferred income taxes 60,000 750,000 Common shares Retained earnings 100,000 $ 1,060,000 210,000 $ 870,000 White had patents, not shown on the SFP, that had an estimated fair value of $225,000 and an estimated remaining productive life of 5 years. White's building and equipment had an estimated fair value of $100,000 in excess of carrying value, and the deferred charges were assumed to have a fair value of zero. White's buildings and equipment are being depreciated on the straight-line basis and have a remaining useful life of 20 years. The deferred charges are being amortized over 4 years.

Answer rating: 100% (QA)

BLACK Statement of Comprehensive Income for the year ended 31st December 2020 Equity Basis Sales 250... View the full answer