The financial statements of Pa and Son as at December 31, Year 6 are shown below:...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The financial statements of Pa and Son as at December 31, Year 6 are shown below: Additional information: 1. Pa acquired 80% of Son's common shares on January 1, Year 1 for $170,000. At that date, Son's reported a retained earnings balance of $20,000 and common shares $125,000. On that dated, Son's net assets were equal to fair market value with the exception of the following: Fair Value $ 60,000 $240,000 $ 12,000 Balance Sheets At December 31, Year 6 Pa Son Carrying Value. $ 50,000 $260,000 $ 10.000 Assets Cash Receivables 16,800 21,000 14,000 Inventory Equipment (10 years useful life remaining) Land Inventory Land Property, plant and equipment Accumulated depreciation Other assets 25,000 45,000 20,000 175,000 35,000 59,600 50,000 10,000 2. Annual impairment tests of goodwill resulting in losses of $8,000 in Year 3. At December 31, Year 6, the recoverable value of goodwill was $65,000. 3. Pa uses the cost method. 4. Assume a 40% corporate tax rate. 5. Son's sales during Year 6 include $70,000 of sales to Pa. Goods purchased from Son and included in Pa's inventories were $50,000 at the end of Year 5 and $30,000 at the end of Year 6. Son's gross profit margin to Pa is 30%. 6. During Year 6, Pa sold inventory that it had purchased for $80,000 to Son for $100,000. 35% of this inventory was resold by Son by December 31, Year 6. 7. On April 1, Year 6, Pa sold machinery to Son for $40,000. The carrying value of the machinery at the date of sale was $48,000. The remaining useful life of the machinery on that date was 4 250,000 40,000 Investment in Son 170,000 473.600 307,800 Liabilities and Shareholders' equity Current liabilities 36,400 Long-term liabilities Common shares Retained earnings 350,000 87,200 $ 473.600 37,800 102,500 125,000 42.500 307.800 years. 8. On January 1, Year 4, Son sold a building to Pa for $60,000. Son had purchased the building on January 1, Year 1 for $80,000 and it had an estimated 8 year life on that date with no salvage value. 9. On March 1, Year 6, Son borrowed $10,000 from Pa. The one-year note had interest rate of 6%. Both the principal and interest were payable at maturity. Statements of Retained Earnings For the year ended December 31, Year 6 Pa Son Retained earnings, Jan 1 Net income 77,600 34,600 25,000 87.200 25,000 29,500 12,000 $42.500 Required: 1. (a) Prepare the calculation and allocation of acquisition differential schedule and the acquisition differential amortization and goodwill impairment schedule (4 marks) (b) Prepare the intercompany profits, gains and losses schedule (4 marks) (c) Prepare the calculation of consolidated net income for Year 6 (11.5 marks) (d) Prepare the calculation of consolidated retained earnings at Jan. 1, Year 6 (5 marks) (e) Prepare in good form the following for Year 6: a. Consolidated income statement (24 marks) b. Consolidated retained earnings statement (2 marks) c. Consolidated balance sheet (28.5 marks) Dividends Retained earnings Income Statements For the year ended December 31, Year 6 Pa Son Sales revenue Other income $ 270,000 $ 430,200 42,400 350,000 18,000 57,000 173 000 2. Prepare the working paper eliminating journal entries for the inter-company sale of the machinery in Year 6 (3 marks) Cost of goods sold Depreciation & amortization expense General and administration expenses Interest expense 28,000 19,000 9,500 11,000 29,500 Income taxes expense 13,000 Net income 34,600 The financial statements of Pa and Son as at December 31, Year 6 are shown below: Additional information: 1. Pa acquired 80% of Son's common shares on January 1, Year 1 for $170,000. At that date, Son's reported a retained earnings balance of $20,000 and common shares $125,000. On that dated, Son's net assets were equal to fair market value with the exception of the following: Fair Value $ 60,000 $240,000 $ 12,000 Balance Sheets At December 31, Year 6 Pa Son Carrying Value. $ 50,000 $260,000 $ 10.000 Assets Cash Receivables 16,800 21,000 14,000 Inventory Equipment (10 years useful life remaining) Land Inventory Land Property, plant and equipment Accumulated depreciation Other assets 25,000 45,000 20,000 175,000 35,000 59,600 50,000 10,000 2. Annual impairment tests of goodwill resulting in losses of $8,000 in Year 3. At December 31, Year 6, the recoverable value of goodwill was $65,000. 3. Pa uses the cost method. 4. Assume a 40% corporate tax rate. 5. Son's sales during Year 6 include $70,000 of sales to Pa. Goods purchased from Son and included in Pa's inventories were $50,000 at the end of Year 5 and $30,000 at the end of Year 6. Son's gross profit margin to Pa is 30%. 6. During Year 6, Pa sold inventory that it had purchased for $80,000 to Son for $100,000. 35% of this inventory was resold by Son by December 31, Year 6. 7. On April 1, Year 6, Pa sold machinery to Son for $40,000. The carrying value of the machinery at the date of sale was $48,000. The remaining useful life of the machinery on that date was 4 250,000 40,000 Investment in Son 170,000 473.600 307,800 Liabilities and Shareholders' equity Current liabilities 36,400 Long-term liabilities Common shares Retained earnings 350,000 87,200 $ 473.600 37,800 102,500 125,000 42.500 307.800 years. 8. On January 1, Year 4, Son sold a building to Pa for $60,000. Son had purchased the building on January 1, Year 1 for $80,000 and it had an estimated 8 year life on that date with no salvage value. 9. On March 1, Year 6, Son borrowed $10,000 from Pa. The one-year note had interest rate of 6%. Both the principal and interest were payable at maturity. Statements of Retained Earnings For the year ended December 31, Year 6 Pa Son Retained earnings, Jan 1 Net income 77,600 34,600 25,000 87.200 25,000 29,500 12,000 $42.500 Required: 1. (a) Prepare the calculation and allocation of acquisition differential schedule and the acquisition differential amortization and goodwill impairment schedule (4 marks) (b) Prepare the intercompany profits, gains and losses schedule (4 marks) (c) Prepare the calculation of consolidated net income for Year 6 (11.5 marks) (d) Prepare the calculation of consolidated retained earnings at Jan. 1, Year 6 (5 marks) (e) Prepare in good form the following for Year 6: a. Consolidated income statement (24 marks) b. Consolidated retained earnings statement (2 marks) c. Consolidated balance sheet (28.5 marks) Dividends Retained earnings Income Statements For the year ended December 31, Year 6 Pa Son Sales revenue Other income $ 270,000 $ 430,200 42,400 350,000 18,000 57,000 173 000 2. Prepare the working paper eliminating journal entries for the inter-company sale of the machinery in Year 6 (3 marks) Cost of goods sold Depreciation & amortization expense General and administration expenses Interest expense 28,000 19,000 9,500 11,000 29,500 Income taxes expense 13,000 Net income 34,600
Expert Answer:
Answer rating: 100% (QA)
Fianacial statement of Pa Son as at December 31 year 6 INCOME STATEMENT CONSOLIDATED INCOME STATEMENT OF Pa AND SON FOR YEAR ENDED DECEMBER 31 YEAR 6 Pa Son Adjustments consolidated Pa Pa Son Son Sale... View the full answer
Related Book For
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
Posted Date:
Students also viewed these accounting questions
-
The following information was taken from the financial statements of Finn Resources Inc. for December 31 of the current fiscal year: The net income was $600,000 and the declared dividends on the...
-
The financial statements of The Hershey Company appear in Appendix B, following the financial statements for Tootsie Roll in Appendix A. Instructions (a) Based on the information contained in these...
-
The following information was taken from the financial statements of ALZA Corporation. Note 6: Borrowings On July 28, 2000, ALZA completed a private offering of the 3% Zero Coupon Convertible...
-
A trader has a soft limit of $8MM USD and a hard limit of $10MM USD. Their current NOP is $3MM USD. They purchase $6MM USD, sell $1MM USD, and then purchase another $5MM USD. Which of the following...
-
Moss Manufacturing produces several types of bolts. The products are produced in batches according to customer order. Although there are a variety of bolts, they can be grouped into three product...
-
A cylinder is fitted with a 10-cm-diameter piston that is restrained by a linear spring (force proportional to distance) as shown in Fig. P3.113. The spring force constant is 80 kN/m and the piston...
-
Five tests are performed, and the P-values are 0.02, 0.11, 0.23, 0.38, and 0.45. Use the Bonferroni adjustment to adjust the P-value of 0.02.
-
Modify the guessing-game program so that the user thinks of a number that the computer must guess. The computer must make no more than the minimum number of guesses, and it must prevent the user from...
-
What characteristic of a data warehouse ensures that once data has been loaded there can be no alteration or changes made?
-
Chase Manhattan Bank The workload in many areas of bank operations has the characteristics of a nonuniform distribution with respect to time of day. For example, at Chase Manhattan Bank, the number...
-
5. Four factory workers and a supervisor make a team in the Machining Department. The supervisor earns P100 per hour, and the combined hourly charge of the four workers is P320. Each employee is...
-
How do you feel about bona fide occupational qualifications?
-
What website helps people find jobs in sport?
-
Should the interview be the primary criterion in selecting a coach? Why or why not?
-
What do you think about promoting from within for pro baseball teams? Why would this work or not work?
-
What are the components of a job analysis?
-
Communicate Clearly #4 Expense Report Directions: Download the CH 13 Expense Report file Download CH 13 Expense Report file. Open the file in Microsoft Excel. Edit the report to correct errors in...
-
Given the table below, about how much force does the rocket engine exert on the 4.0 kg payload? Distance traveled with rocket engine firing (m) Payload final velocity (m/s) 500 320 490 310 1020 450...
-
Jennifer Cosmetics wants to construct a new building. It has two building options, as follows: a. Hire a contractor to do all the work. Jennifer has a bid of $850,000 from a reputable contractor to...
-
Lihue Enterprises issued $1,500,000, 9%, 20-year bonds on November 1, 2011. Interest payment dates are May 1 and November 1. The bonds were sold at face value. Required: 1. Provide the journal entry...
-
The following aging of accounts receivable is for Harry Company at the end of its first year of business: Harry Company has collected the following bad debt information from a consultant familiar...
-
Write down the structure of a three-dimensional VARMA model if the vector time series has the following three components: \(\operatorname{SCM}(0,0), \operatorname{SCM}(0,1)\), and...
-
Consider the three SCMs of Question 3. If the maximum elements, in absolute value, of the three rows of the transformation matrix \(T\) are \((1,1),(2,3)\), and \((3,2)\), respectively. Write down...
-
Consider the realized volatilities of the Alcoa stock from January 2, 2003, to May 7, 2004, for 340 observations. The realized volatilities are the sum of squares of intraday \(m\)-minute log...
Study smarter with the SolutionInn App