Paper Corp. purchased 70% of the outstanding shares of Sand Ltd. on January 1, Year 2,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Paper Corp. purchased 70% of the outstanding shares of Sand Ltd. on January 1, Year 2, at a cost of $98,280. Paper has always used the equity method to account for its investments. On January 1, Year 2, Sand had common shares of $50,000 and retained earnings of $32,000, and fair values were equal to carrying amounts for all its net assets, except inventory (fair value was $5,800 less than carrying amount) and equipment (fair value was $18,300 greater than carrying amount). The equipment, which is used for research, had an estimated remaining life of six years on January 1, Year 2 The following are the financial statements of Paper Corp. and its subsidiary Sand Ltd. as at December 31, Year 5: BALANCE SHEETS At December 31, Year 5 Paper Cash $ Sand $ 25,000 Accounts receivable 47,000 34,800 Note receivable 33,600 Inventory 90,000 51,500 Equipment (net) 319,000 83,500 Land 200,000 45,000 Investment in Sand 144,893 $800,893 $273,400 Bank indebtedness Accounts payable $197,635 $ 80,000 65,900 Notes payable Common shares Retained earnings 33,600 150,000 50,000 339,658 157,500 $800,893 $273,400 Sales Management fee revenue Equity method income from Sand Interest income Gain on sale of land INCOME STATEMENTS For the year ended December 31, Year 5 Paper Sand $ 858,000 $ 419,700 28,800 2,461 3,360 9,600 889,261 432,660 Cost of sales 514,800 279,800 Research and development expenses. 47,500 18,000 Interest expense 22,000 Miscellaneous expenses 121,000 36,400 Income taxes 73,320 39,384 778,620 373,584 Net income $ 110,641 $ 59,076 Additional Information During Year 5. Sand made a cash payment of $2,400 per month to Paper for management fees, which is included in Sand's Miscellaneous expenses. During Year 5. Paper made intercompany sales of $65,000 to Sand. The December 31, Year 5, inventory of Sand contained goods purchased from Paper amounting to $19,500. These sales had a gross profit of 35%. On April 1, Year 5, Paper acquired land from Sand for $33,600. This land had been recorded on Sand's books at a carrying amount of $24,000. Paper paid for the land by signing a $33,600 note payable to Sand, bearing yearly interest at 10%. Interest for Year 5 was paid by Paper in cash on December 31, Year 5. This land was still being held by Paper on December 31. Year 5. The value of consolidated goodwill remained unchanged from January 1, Year 2, to July Year 5. On July 1, Year 5, a valuation was performed, indicating that the recoverable amount of consolidated goodwill was $5,000. During the year ended December 31, Year 5. Paper paid dividends of $80,000 and Sand paid dividends of $20,000. Sand and Paper pay taxes at a 40% rate. Assume that none of the gains or losses were capital gains or losses. Required: (a) Prepare, in good form, a calculation of goodwill and any undepleted acquisition differential as of December 31, Year 5. (Negative amounts should be Indicated by a minus sign. Leave no cells blank - be certain to enter "O" wherever required. Omit $ sign in your response.) Inventory Equipment Goodwill Balance January 1, Year 2 $ Changes to Balance Year 2-4 $ Year 5 $ Dec. 31, Year 5 $ $ (b) Prepare Paper's consolidated income statement for the year ended December 31, Year 5, with expenses classified by function. (Round your answer to nearest whole dollar.) PAPER CORP. Consolidated Income Statement For the Year Ended December 31, Year 5 Total revenue Total expenses Attributable to: Shareholders of Paper Non-controlling interest $ $ (c) Calculate the following balances that would appear on Paper's consolidated balance sheet as at December 31, Year 5: (Leave no cells blank - be certain to enter "O" wherever required. Omit $ sign in your response.) (I) Inventory (II) Land (III) Notes payable (lv) Non-controlling interest (v) Common shares (d) Assume that an independent business valuator valued the non-controlling interest at $39,125 at the date of acquisition. Calculate goodwill impairment loss and profit attributable to non-controlling interest for the year ended December 31, Year 5. (Omit $ sign In your response.) Goodwill impairment loss Profit attributable to non-controlling interest Paper Corp. purchased 70% of the outstanding shares of Sand Ltd. on January 1, Year 2, at a cost of $98,280. Paper has always used the equity method to account for its investments. On January 1, Year 2, Sand had common shares of $50,000 and retained earnings of $32,000, and fair values were equal to carrying amounts for all its net assets, except inventory (fair value was $5,800 less than carrying amount) and equipment (fair value was $18,300 greater than carrying amount). The equipment, which is used for research, had an estimated remaining life of six years on January 1, Year 2 The following are the financial statements of Paper Corp. and its subsidiary Sand Ltd. as at December 31, Year 5: BALANCE SHEETS At December 31, Year 5 Paper Cash $ Sand $ 25,000 Accounts receivable 47,000 34,800 Note receivable 33,600 Inventory 90,000 51,500 Equipment (net) 319,000 83,500 Land 200,000 45,000 Investment in Sand 144,893 $800,893 $273,400 Bank indebtedness Accounts payable $197,635 $ 80,000 65,900 Notes payable Common shares Retained earnings 33,600 150,000 50,000 339,658 157,500 $800,893 $273,400 Sales Management fee revenue Equity method income from Sand Interest income Gain on sale of land INCOME STATEMENTS For the year ended December 31, Year 5 Paper Sand $ 858,000 $ 419,700 28,800 2,461 3,360 9,600 889,261 432,660 Cost of sales 514,800 279,800 Research and development expenses. 47,500 18,000 Interest expense 22,000 Miscellaneous expenses 121,000 36,400 Income taxes 73,320 39,384 778,620 373,584 Net income $ 110,641 $ 59,076 Additional Information During Year 5. Sand made a cash payment of $2,400 per month to Paper for management fees, which is included in Sand's Miscellaneous expenses. During Year 5. Paper made intercompany sales of $65,000 to Sand. The December 31, Year 5, inventory of Sand contained goods purchased from Paper amounting to $19,500. These sales had a gross profit of 35%. On April 1, Year 5, Paper acquired land from Sand for $33,600. This land had been recorded on Sand's books at a carrying amount of $24,000. Paper paid for the land by signing a $33,600 note payable to Sand, bearing yearly interest at 10%. Interest for Year 5 was paid by Paper in cash on December 31, Year 5. This land was still being held by Paper on December 31. Year 5. The value of consolidated goodwill remained unchanged from January 1, Year 2, to July Year 5. On July 1, Year 5, a valuation was performed, indicating that the recoverable amount of consolidated goodwill was $5,000. During the year ended December 31, Year 5. Paper paid dividends of $80,000 and Sand paid dividends of $20,000. Sand and Paper pay taxes at a 40% rate. Assume that none of the gains or losses were capital gains or losses. Required: (a) Prepare, in good form, a calculation of goodwill and any undepleted acquisition differential as of December 31, Year 5. (Negative amounts should be Indicated by a minus sign. Leave no cells blank - be certain to enter "O" wherever required. Omit $ sign in your response.) Inventory Equipment Goodwill Balance January 1, Year 2 $ Changes to Balance Year 2-4 $ Year 5 $ Dec. 31, Year 5 $ $ (b) Prepare Paper's consolidated income statement for the year ended December 31, Year 5, with expenses classified by function. (Round your answer to nearest whole dollar.) PAPER CORP. Consolidated Income Statement For the Year Ended December 31, Year 5 Total revenue Total expenses Attributable to: Shareholders of Paper Non-controlling interest $ $ (c) Calculate the following balances that would appear on Paper's consolidated balance sheet as at December 31, Year 5: (Leave no cells blank - be certain to enter "O" wherever required. Omit $ sign in your response.) (I) Inventory (II) Land (III) Notes payable (lv) Non-controlling interest (v) Common shares (d) Assume that an independent business valuator valued the non-controlling interest at $39,125 at the date of acquisition. Calculate goodwill impairment loss and profit attributable to non-controlling interest for the year ended December 31, Year 5. (Omit $ sign In your response.) Goodwill impairment loss Profit attributable to non-controlling interest
Expert Answer:
Related Book For
Modern Advanced Accounting In Canada
ISBN: 9781259066481
7th Edition
Authors: Hilton Murray, Herauf Darrell
Posted Date:
Students also viewed these finance questions
-
Suppose Armstrong Cycles, Inc., reported a number of special items on its income statement. The following data, listed in no particular order, came from Armstrongs financial statements (amounts in...
-
Paper Corp. purchased 70% of the outstanding shares of Sand Ltd. on January 1, Year 2, at a cost of $84,000. Paper has always used the equity method to account for its investments. On January 1, Year...
-
Answer the Multple Choice Questions and the code for problem 6in the end PROBLEM 1: General UNIX 1. What is UNIX? a) an operating system b) a text editor c) programming language d) software program...
-
The current price of silver is $30 per ounce. The storage costs are $0.48 per ounce per year payable quarterly in advance. Assuming that interest rates are 10% per annum for all maturities, calculate...
-
Find α and β that solve the vector equation. 0 3 2
-
Find the natural frequencies of the beam shown in Fig. 12.33, using three finite elements of length \(l\) each. p. A, I, E + FIGURE 12.33 Fixed-fixed beam with intermediate supports.
-
Eastport Inc. was organized on June 5, 2016. It was authorized to issue 300,000 shares of $10 par common stock and 50,000 shares of 5 percent cumulative class A preferred stock. The class A stock had...
-
Sunshine lawn service's cost formula for salaries and wages is $ 1 , 1 0 0 per month plus $ 3 2 per lawn mowed. For the month of August, the company planned for activity of 1 0 0 lawns to be mowed,...
-
Q. 1. The Government of India has instituted the dual pricing system in the textile industry in the country. You are the head of the costing division of Modern Textile Co. Ltd. Your company produces...
-
Sheridan Supply Company's accounting records show the following at the year ending on December 31, 2025. Purchase Discounts $11300 Freight-In 15300 Purchases 702020 Beginning Inventory 49000 Ending...
-
Growth Rates Go to quote.yahoo.com and enter the ticker symbol IP for International Paper. When you get the quote, follow the Research link. What is the projected sales growth for International Paper...
-
Change in Net Working Capital Find the most recent abbreviated balance sheets for General Dynamics at finance.yahoo.com. Enter the ticker symbol GD, follow the Research link, and the Financials link....
-
Year 1 total cash dividends Year 2 total cash dividends Year 3 total cash dividends Year 4 total cash dividends $ 18,000 28,000 300,000 450,000 York's outstanding stock consists of 80,000 shares of...
-
Calculating Future Values Go to www.dinkytown.net and follow the Savings Calculator link. If you currently have $10,000 and invest this money at 9 percent, how much will you have in 30 years? Assume...
-
Explain the role of the PCAOB.
-
Why should you not model a decision variable as a random variable with a probability distribution?
-
Express the vibration of a machine given by \(x(t)=-3.0 \sin 5 t-2.0 \cos 5 t\) in the form \(x(t)=A \cos (5 t+\phi)\).
-
An exponential function is expressed as \(x(t)=A e^{-\alpha t}\) with the values of \(x(t)\) known at \(t=1\) and \(t=2\) as \(x(1)=0.752985\) and \(x(2)=0.226795\), respectively. Determine the...
-
If the motion of a machine is described as \(8 \sin (5 t+1)=A \sin 5 t+B \cos 5 t\), determine the values of \(A\) and \(B\).
Study smarter with the SolutionInn App