On April 1 st . Year 2017, X Company purchased 80% of the Y Company for $1,000,000.
Question:
On April 1st. Year 2017, X Company purchased 80% of the Y Company for $1,000,000.
At that date the common shares of Y was $450,000 and retained earnings $ 525,000
At this date the book values and fair values of the assets and liabilities of the Y Company were equal to their fair values except for the following items.
Book Value………………Fair Value
Plant and equipment…………………………………….60,000……………….….…..80,000
Accounts receivable……………………………………...40,000……………………….50,000
Inventories………………………………………………….. 80,000………………….……45,000
Accounts payable……………………………………….. 50,000………………….……55,000
The plant and equipment had a remaining useful life of 10 years.
Goodwill testing resulted in impairment in goodwill in 2019 of $60,000 and $35,000 in 2020.
The financial statements for the two companies for the year ended December 31, 2020 were as follows:-
Assets:-
Cash………………………………………………………$ 12,000…………………..…$ 25,000
Accounts receivable………………………………. 200,000……………………….230,000
Inventories…………………………………………….. 185,000…………………….. 250,000
Capital assets, net………………………………….1,445,000……………………... 840,000
Investment in the Y Company…………………1,000,000……………………………….
TOTAL ASSETS……………………………………$ 2,842,000………………....$1,345,000
Liabilities & Owners’ Equity:-
Accounts payable………………………………….$ 240,000…………………..$ 130,000
Other liabilities………………………………………. 320,000………………………. 65,000
Common Shares…………………………………… 1,200,000…………………. …. 450,000
Retained Earnings……………………………………1,082,000……………………. 700,000
TOTAL LIABILITIES & OWNERS’ EQUITY.$ 2,842,000………………….$1,345,000
Sales…………………………………………………………$2,900,000……………… $ 955,000
Dividends…………………………………………………… 64,000
Cost of goods sold……………………………………… 1,500,000………………… 545,000
Gross Margin…………………………………………….. 1,464,000…………………. 410,000
Amortization Expense…………………………………… 245,000………………. . 90,000
Other expenses……………………………………………. 130,000………………… . 30,000
Dividends…………………………………………………….. 400,000………………… 80,000
Income Taxes……………………………………………… 185,000………………….. 21,000
NET INCOME AFTER TAXES………………………….$ 504,000………………..$189,000
Additional Information:-
1. On September 1st. 2018, Y purchased a machine from X for $52,000. The machine had a net book value of $40,000 and an estimated useful life of 8 years at the time of the sale to Y.
2. The 2020 opening inventories of X contained $50,000 of merchandise purchased from Y during 2019. Y had recorded a profit of $20,000 on these sales.
3. During 2020, Y sales to X totaled $24,000. These sales were made at a 20% mark up on cost.
4. During 2020, X sales to Y totaled $50,000. Y’s ending inventories in 2020 contained $30,000 of merchandise purchase from X. X charges Y a 10% mark up on sales.
5. Both companies use a 40% tax rate.
Required
1. Calculate consolidated net income for the year ending December 31st 2020
2. What is the net income attributable to non-controlling interest
Accounting Principles
ISBN: 978-1119048473
7th Canadian Edition Volume 2
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak