1 answer

Large Ltd. purchased 80% of Small Company on January 1, Year 6, for $660,000, when the...

Question:

Large Ltd. purchased 80% of Small Company on January 1, Year 6, for $660,000, when the statement of financial position for Small showed common shares of $490,000 and retained earnings of $190,000. On that date, the inventory of Small was undervalued by $51,000, and a patent with an estimated remaining life of five years was overvalued by $76,000.

Small reported the following subsequent to January 1, Year 6:

Profit (Loss) Dividends
Year 6 $ 116,000 $ 34,000
Year 7 (44,000 ) 19,000
Year 8 99,000 49,000

A test for goodwill impairment on December 31, Year 8, indicated a loss of $20,200 should be reported for Year 8 on the consolidated income statement. Large uses the cost method to account for its investment in Small and reported the following for Year 8 for its separate-entity statement of changes in equity:

Retained earnings, beginning $ 590,000
Profit 290,000
Dividends (61,000 )
Retained earnings, end $ 819,000

(b) Compute the following on the consolidated financial statements for the year ended December 31, Year 8: (Omit $ sign in your response.)

(i) Goodwill

Goodwill           $

(ii) Non-controlling interest on the statement of financial position

Non-controlling interest           $

(iii) Retained earnings, beginning of year

Retained earnings, beginning of year           $

(iv) Profit attributable to Large’s shareholders

Profit attributable to Large’s shareholders           $

(v) Profit attributable to non-controlling interest

Profit attributable to non-controlling interest           $


Answers

Refer the below images for the above mentioned questions, in a detailed way of solution.

Solution ; Requirement ® : $ 660000 cost of 8o4. investment Implied cost of 100-l investment $825ooo amount of carrying amoun$ 149800 ) Goodwill ($ 170000 - $ 20200) i) Smalls ordinary Shares: Smalls retained earnings ($ 190000 + $ 116000 - $34000i Larges profit Less - Dividends from Small ($49000 X 801) $ 290000 $(39200) $ 210800 Smalls profit less;- amortization of

.

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