On January $1".2018,$ x Company purchased $80\%$ of the outstanding common shares of Y for $$2$ million in

cash. On this date, the shareholders' equity of Y consisted of $ $1,000,000$ par value common stock

and $$800,000$ of retained earnings Both companies use straight line method calculate amortization.

For the year ended December $31".\mathrm{.}2021,$ the condensed income statements of X and Y were as follows:$-$

X$....................$Y$..........".$

Sales and other revenue............................ $.$$$2,500,00...................\mathrm{.}800.,000$

Cost of Goods so$.$ld$..............................\_,.\mathrm{.}0........................,000$

Amortization expense.............................

$600,00.........................\mathrm{.}0.,000$

Other expenses........................................$\mathrm{.}4\mathrm{.}00.,0\mathrm{.}0........................\mathrm{.}2\mathrm{.}0,000$

Net income.

$$500,000.$ p$......................$ $ $120,000$

w$......................................\mathrm{.}2$

At December $31".2021,$ the balance sheets of the two companies were as follows:$-$

Xo$.....................$

$($ash$..........................................\mathrm{.}0.,0...........$$$\mathrm{.}2\mathrm{.}20,000$

Accounts receivable........ $.................7\mathrm{.}5.,...................\mathrm{.}0,000$

inventor.........................................,$\mathrm{.}50,0..................\mathrm{.}50,000$

Land. ww$....................................................3,000,000.$

$........................$

$900,000$

Bldg$.$&Equipment...............................$\mathrm{.}0,\mathrm{.}0................\mathrm{.}9\mathrm{.}0,000$

Accumulated depreciatio. $............................(\mathrm{.}00.,0............\mathrm{.}400,000$

TOTAL ASSETS.....................$$.,000.,00.........$$$3.120\mathrm{.}000$

Current liabilitie s$.................................$$$.,800.,......................\mathrm{.}0.,000$

Long term liabilities.No$-$par Common Stock.

w$....................................$

$3,000,000.$

$\mathrm{.}1,000,000$

w$.......................$

Opening F Retained Earnings..........""

$1,800,000........................\mathrm{.}800,000$

$-.............$

Net incone.................................................. $.,00.......................\mathrm{.}120,000$

Dividendsu. $...............$

$300,000)..$

totaL liABiliTieS & owners' eQuity $ $9,000,000.$

$(100,000)$

$+$$$3,120,000$

Additional Information:$-$

On January $1".2018,$Y had accounts receivable which was $$100,000$ in excess of its carrying

value; inventory had a fair value that was $$100,000$ less than its carrying value. Y also had a building

with a fair value that was $$600,000$ greater than the carrying value as well as long term liabilities with a

fair value which was $$300,000$ in excess of its carrying amount

the building had an estimated remaining useful life of $20$ years and the long$-$term debt was $15$ years

ii$.$

On April $2"\mathrm{.}2019,$ Y sold a machine to X for $$60,000.$ When Y purchased the machine on January

$2".2015,$ for $$80,000$ it was estimated that its service life would be $10$ years with no salvage value.

There was no change in the estimated service life or salvage value at the time of the intercompany sale.

iii D uring $2021,$ X sold merchandise to Y for $$100,000,$ a price that includes a $40\%$ gross profit.

At the end of the year $55\%$ of this inventory remained.

iv$.$

n December $31"\mathrm{.}2020,$ the inventories of Y contained merchandise purchased from X on which

X had recognized a gross profit of $$25,000.$

On December $31"\mathrm{.}2021,$ Y owed X $$100,000.$

vi$.$

During the year X declared paid dividends of $$300,000$ and Y declared and paid dividends of

$$100,000.$

vii.

$5$oodwill testing was done annually and this resulted in impairment of goodwill of $$16,000$ in

$2018,$ $$15,200$ in $2019$ and $$10,400$ in $2021$

viil

X accounts for its investment in Y on the cost basis.

ix$.$

Both companies had a tax rate of $30\%$ throughout the year.

Required:$-$

Calculate goodwill at the date of acquisition$(5$ marks$)$

The amortization schedule to December $31".2021(5$ marks$)$

#i

Tax schedules$(10$ marks$)$

iv$.$

Consolidated Net Income for year ending Dece