Question $2(18$ marks$)$

On January $1,$ Year $5,$ Science Inc. acquired $85\%$ of the common shares of Biology Ltd$.$ in

exchange for a new issue of its own shares valued at $$5,500.$ At that date theshareholders'

equity section of Biology Ltd$\text{'}$s balance sheet was as follows:

The preferred shares were cumulative and non$-$participating with a dividend rate of $5\%$ per

year and were redeemable at $103.$ Dividends had not been paid in Year $4.$ Any acquisition

differential was allocated to goodwill. During Year $5,$ goodwill was tested and there was an

impairment loss of $$75.$

During Year $5,$ Science Ltd$.$ had a net income of $$2,800$ and paid dividends of $$700$ and

Biology Ltd$.$ had a net income of $$700$ and paid dividends of $$175.$ The only transaction

between the two companies was the sale of a parcel of land from Biology to its parent

company. The land was sold for $$750$ and had cost Biology $$400$ when originally purchased.

The gain was taxable at the capital gains rate of $30\%.$

Required $($hint: acquisitions differential $=$$$751)$

a$)$ Calculate consolidated net income for year ending December $31,$ Year $5.$ You MUST show

the net income attributable to the parent, NCl common and NCI preferred. Assume

Science does not own any of the preferred shares of Biology. $(8$ marks$)$

b$)$ What is the amount of the non$-$controlling interest shown on the consolidated balance sheet

of Science Inc, as at December $31,$ Year $5?$ For NCIs, show the calculations forcommon and

preferred shareholders separately. $(10$ marks$)$