On December 31, 2023, Pan Inc. purchased 75% of the 400,000 ordinary shares of Sand Corp....

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On December 31, 2023, Pan Inc. purchased 75% of the 400,000 ordinary shares of Sand Corp. for $960,000. The fair values were equal to carrying values for all its net assets except for Inventory, which had a fair value that was $16,000 more than the carrying value Accounts receivable, which had a fair value of $12,000 less than their book value Equipment, whose fair value was $42,000 less than the net book value. As of December 31, 2023, Sand Corp.'s equipment had a remaining useful life of 6 years. Long term liabilities whose fair value was $36,000 less than book value. As of December 31, 2023, these liabilities had 8 years remaining to maturity. An unrecorded patent, valued at $45,000. As of December 31, 2023, the patent had a remaining legal life of 7 years, and an estimated useful life of 5 years. The statements of financial position for Pan Inc. and Sand Corp. at December 31, 2023 were as follows: Cash Accounts and other receivables Inventory PP&E net Investment in Sand Corp. Total assets Current liabilities Long term liabilities Ordinary shares Retained earnings Total Statements of Financial Position December 31, 2023 Pan Inc. Sand Corp. $ 200,000 $ 400,000 520,000 420,000 2,300,000 960,000 $ 4,600,000 $ 640,000 1,200,000 1,000,000 1,760,000 $ 4,600,000 300,000 300,000 1,200,000 $2,000,000 $ 150,000 900,000 400,000 550,000 $2,000,000 Pan Inc. uses the fair value enterprise method to value the non-controlling interest. Sand's common shares were trading at $3.00 per share on January 1, 2024. Additional information 1) Each year, goodwill is evaluated to determine if there has been a permanent impairment. Goodwill impairment losses were $40,000 and $60,000 in 2025 and 2027, respectively. 2) On January 1, 2025, Sand Corp. sold a building to Pan Inc. and recognized a gain on sale of $120,000. This building had an estimated useful life of 12 years at the date of the intercompany sale. 3) On July 1, 2026, Sand Corp. purchased equipment from Pan Inc. for $150,000. Pan Inc. recognized a loss on sale of $50,000. The equipment had an estimated useful life of 5 years at the date of the intercompany sale. 4) On December 31, 2026, the inventory of Sand Corp. contained $100,000 of merchandise purchased from Pan Inc. During 2027, Pan Inc. sold merchandise to Sand Corp. for $500,000. Of this merchandise, 40% remains in Sand's December 31, 2027 inventory. Pan Inc. records a gross profit margin of 35% of the selling price on intercompany sales. 5) On June 1, 2027, Pan Inc. lent $100,000 to Sand Corp against a 9%, 3 year note with interest payable every note anniversary date. 6) On December 15, 2027, Sand Corp. declared and paid $80,000 in total dividends for the current year. Pan Corp. declared $100,000 in dividends to its shareholders. This amount has not been paid at the year-end and is included in current liabilities. 7) On July 1, 2026, Pan Inc. sold a parcel of land to Sand Corp. for $200,000. This land had a carrying value of $100,000 on Pan Inc.'s books. In 2027, Sand Corp. sold (a quarter) of this land for $100,000. 8) Pan Limited charged Sand Corp. management fees of $15,000 per month from August to December 2027. Sand Corp has included the management fees paid in Selling and Administrative expenses. 9) Both companies pay income taxes at the same rate. The financial statements for Pan and Sand for the financial year ended December 31, 2027 are as follows: Sales Interest and other income Total revenues and gains Cost of goods sold Selling and administrative Depreciation Interest and other Statements of Profit or Loss year ended December 31, 2027 Pan Inc. Sand Corp. $1,760,000 220,000 $1,980,000 996,000 $1,000,000 160,000 $ 1,160,000 510,000 380,000 180,000 24,000 250,000 100,000 60,000 Total expenses Income before tax Income tax expense Net income 1,580,000 400,000 120,000 $280,000 Statements of Financial Position December 31, 2027 Cash Accounts and other receivables Inventory PP&E - net Investment in Sand Corp. Total assets Current liabilities Long term liabilities Ordinary shares Retained earnings Total REQUIRED: 920,000 240,000 72,000 $168,000 Pan Inc. Sand Corp. $325,000 $242,000 415,000 368,000 340,000 380,000 1,960,000 1,260,000 960,000 $4,000,000 $2,250,000 $368,000 $150,000 425,000 960,000 1,000,000 400,000 2,207,000 740,000 $4,000,000 $2,250,000 a) Prepare Pan Inc.'s consolidated statement of financial position dated, December 31, 2023. b) Prepare Pan Inc's consolidated statement of financial position dated, December 31, 2027 and consolidated statements of changes in equity, and of comprehensive income for the year ended December 31, 2027. Include the amount that will be reported as basic earnings per share on the consolidated SCI. Pan Inc. had 500,000 ordinary shares outstanding throughout the year. c) Assume that Pan Inc. uses the identifiable net assets method to value NCI. Calculate the following items to be reported in the consolidated financial statements for the year ended December 31, 2027: . ii. Net income attributable to NCI in the consolidated SCI Goodwill on the consolidated SFP Non-controlling interest on the consolidated SFP d) Continue with the information from part (b) above. Assume that on January 1, 2028, Pan Inc. sold 30,000 of Sand Corp common shares to Silica Corp. at a price of $5.25 per share. Calculate the "gain or loss to Pan Inc. arising from this transaction, and the change in non-controlling interest as a result. On December 31, 2023, Pan Inc. purchased 75% of the 400,000 ordinary shares of Sand Corp. for $960,000. The fair values were equal to carrying values for all its net assets except for Inventory, which had a fair value that was $16,000 more than the carrying value Accounts receivable, which had a fair value of $12,000 less than their book value Equipment, whose fair value was $42,000 less than the net book value. As of December 31, 2023, Sand Corp.'s equipment had a remaining useful life of 6 years. Long term liabilities whose fair value was $36,000 less than book value. As of December 31, 2023, these liabilities had 8 years remaining to maturity. An unrecorded patent, valued at $45,000. As of December 31, 2023, the patent had a remaining legal life of 7 years, and an estimated useful life of 5 years. The statements of financial position for Pan Inc. and Sand Corp. at December 31, 2023 were as follows: Cash Accounts and other receivables Inventory PP&E net Investment in Sand Corp. Total assets Current liabilities Long term liabilities Ordinary shares Retained earnings Total Statements of Financial Position December 31, 2023 Pan Inc. Sand Corp. $ 200,000 $ 400,000 520,000 420,000 2,300,000 960,000 $ 4,600,000 $ 640,000 1,200,000 1,000,000 1,760,000 $ 4,600,000 300,000 300,000 1,200,000 $2,000,000 $ 150,000 900,000 400,000 550,000 $2,000,000 Pan Inc. uses the fair value enterprise method to value the non-controlling interest. Sand's common shares were trading at $3.00 per share on January 1, 2024. Additional information 1) Each year, goodwill is evaluated to determine if there has been a permanent impairment. Goodwill impairment losses were $40,000 and $60,000 in 2025 and 2027, respectively. 2) On January 1, 2025, Sand Corp. sold a building to Pan Inc. and recognized a gain on sale of $120,000. This building had an estimated useful life of 12 years at the date of the intercompany sale. 3) On July 1, 2026, Sand Corp. purchased equipment from Pan Inc. for $150,000. Pan Inc. recognized a loss on sale of $50,000. The equipment had an estimated useful life of 5 years at the date of the intercompany sale. 4) On December 31, 2026, the inventory of Sand Corp. contained $100,000 of merchandise purchased from Pan Inc. During 2027, Pan Inc. sold merchandise to Sand Corp. for $500,000. Of this merchandise, 40% remains in Sand's December 31, 2027 inventory. Pan Inc. records a gross profit margin of 35% of the selling price on intercompany sales. 5) On June 1, 2027, Pan Inc. lent $100,000 to Sand Corp against a 9%, 3 year note with interest payable every note anniversary date. 6) On December 15, 2027, Sand Corp. declared and paid $80,000 in total dividends for the current year. Pan Corp. declared $100,000 in dividends to its shareholders. This amount has not been paid at the year-end and is included in current liabilities. 7) On July 1, 2026, Pan Inc. sold a parcel of land to Sand Corp. for $200,000. This land had a carrying value of $100,000 on Pan Inc.'s books. In 2027, Sand Corp. sold (a quarter) of this land for $100,000. 8) Pan Limited charged Sand Corp. management fees of $15,000 per month from August to December 2027. Sand Corp has included the management fees paid in Selling and Administrative expenses. 9) Both companies pay income taxes at the same rate. The financial statements for Pan and Sand for the financial year ended December 31, 2027 are as follows: Sales Interest and other income Total revenues and gains Cost of goods sold Selling and administrative Depreciation Interest and other Statements of Profit or Loss year ended December 31, 2027 Pan Inc. Sand Corp. $1,760,000 220,000 $1,980,000 996,000 $1,000,000 160,000 $ 1,160,000 510,000 380,000 180,000 24,000 250,000 100,000 60,000 Total expenses Income before tax Income tax expense Net income 1,580,000 400,000 120,000 $280,000 Statements of Financial Position December 31, 2027 Cash Accounts and other receivables Inventory PP&E - net Investment in Sand Corp. Total assets Current liabilities Long term liabilities Ordinary shares Retained earnings Total REQUIRED: 920,000 240,000 72,000 $168,000 Pan Inc. Sand Corp. $325,000 $242,000 415,000 368,000 340,000 380,000 1,960,000 1,260,000 960,000 $4,000,000 $2,250,000 $368,000 $150,000 425,000 960,000 1,000,000 400,000 2,207,000 740,000 $4,000,000 $2,250,000 a) Prepare Pan Inc.'s consolidated statement of financial position dated, December 31, 2023. b) Prepare Pan Inc's consolidated statement of financial position dated, December 31, 2027 and consolidated statements of changes in equity, and of comprehensive income for the year ended December 31, 2027. Include the amount that will be reported as basic earnings per share on the consolidated SCI. Pan Inc. had 500,000 ordinary shares outstanding throughout the year. c) Assume that Pan Inc. uses the identifiable net assets method to value NCI. Calculate the following items to be reported in the consolidated financial statements for the year ended December 31, 2027: . ii. Net income attributable to NCI in the consolidated SCI Goodwill on the consolidated SFP Non-controlling interest on the consolidated SFP d) Continue with the information from part (b) above. Assume that on January 1, 2028, Pan Inc. sold 30,000 of Sand Corp common shares to Silica Corp. at a price of $5.25 per share. Calculate the "gain or loss to Pan Inc. arising from this transaction, and the change in non-controlling interest as a result.