The trial balances of Gecko Inc. and its subsidiary Romeo Corp. on December 31, 2023 are shown
Question:
The trial balances of Gecko Inc. and its subsidiary Romeo Corp. on December 31, 2023 are shown below:
Gecko | Romeo | |
Inventory | $160,000 | $100,000 |
Plant and equipment (net) | 2,700,000 | 700,000 |
Dividends declared | 200,000 | 100,000 |
Investment in Romeo | 700,000 | |
Cost of goods sold | 650,000 | 90,000 |
Other expenses | 50,000 | 10,000 |
Total debits | $4,460,000 | $1,000,000 |
Liabilities | $1,000,000 | $150,000 |
Common shares | 1,660,000 | 600,000 |
Retained earnings | 600,000 | 100,000 |
Sales and other revenue | 1,200,000 | 150,000 |
Total credits | $4,460,000 | $1,000,000 |
Other Information: Gecko acquired Romeo in three stages:
January 1, 2020: | Gecko purchased 10,000 shares for $100,000. Romeo's retained earnings were $40,000 on that date. The investment is classified as fair value through profit or loss (FVTPL). |
January 1, 2022: | Gecko purchased 30,000 shares for $450,000. Romeo's retained earnings were $80,000 on that date. Gecko has obtained significant influence in the key decisions for Romeo. On December 31, 2022, Romeo's retained earnings were $85,000. |
December 31, 2023: | Gecko purchased 20,000 shares for $150,000. Romeo's retained earnings were $100,000 on that date. Gecko now owns 60% and has control over Romeo. |
Romeo was incorporated on January 1, 2018. On that date, Romeo issued 100,000 voting shares. Any difference between the cost and book value is attributable entirely to trademarks, which are to be amortized over 5 years. The company has neither issued nor retired shares since the date of its incorporation. Gecko sold depreciable assets to Romeo at a loss of $20,000 on January 1, 2022. These assets had a 10 year remaining life. Inter-company sales of inventory during 2023 amounted to $250,000. Unrealized inventory profits for each company are shown below for 2023. The amounts indicate the amount of profit in each company's inventory.
Gecko | |
January 1, 2023: | $10,000 |
December 31, 2023: | $20,000 |
Romeo | |
January 1, 2023: | $20,000 |
December 31, 2023: | $40,000 |
All inventories on hand at the start of 2023 were sold to outsiders during the year. The net incomes of both companies are evenly earned throughout the year. Both companies are subject to an effective corporate tax rate of 20%.
REQUIRED:
1) What amount will be shown in the Gecko's consolidated balance sheet for trademarks as at December 31, 2023?
2)Compute consolidated inventory for Gecko as at December 31, 2023.
3)Compute the consolidated cost of goods sold for 2023.
Advanced Accounting
ISBN: 978-0538480284
11th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng