The following financial statements were prepared on December 31, Year 6: Additional Information: Pearl purchased 80% of the outstanding voting shares of Silver for $3,300,000 on July 1, Year 2, at which time Silver’s retained earnings were $445,000 and accumulated depreciation was $69,000. The acquisition differential on this date was allocated as follows: 20% to undervalued inventory; 40% to equipment with a remaining useful life of 8 years; the balance to goodwill. Pearl accounts for its investment in Silver using the cost method and values the non-controlling interest in its subsidiary based on its fair value on the acquisition date, proportionate to the price paid for its controlling interest. During Year 3, a goodwill impairment loss of $79,000 was recognized, and an impairment test conducted as at December 31, Year 6, indicated that a further loss of $29,000 had occurred. Amortization expense is to be grouped with cost of goods sold. Silver owes Pearl $84,000 on December 31, Year 6. Required: Prepare consolidated financial statements on December 31, Year 6. Calculate goodwill impairment loss and non-controlling interest on the consolidated income statement for the year ended December 31, Year 6, under the parent company extension theory. Calculate goodwill and non-controlling interest on the consolidated balance sheet as at December 31, Year 6, under the parent company extension theory. Silver 190,000 $ BALANCE SHEETS Pearl Cash $ 390,000 Accounts receivable 290,000 Inventory 2,450,000 Plant and equipment 3,450,000 Accumulated depreciation (840,000) Investment in Silver Company, at cost 3,300,000 $ 9,040,000 Liabilities $ 737,000 Common shares 3,750,000 Retained earnings 4,553,000 $ 9,040,000 510,000 3,590,000 (400,000) $ $ 3,890,000 543,000 2,050,000 1,297,000 3,890,000 $ $ 1,450,000 INCOME STATEMENTS Sales $ 4,450,000 Dividend income 232,000 4,682,000 Cost of sales 2,590,000 Miscellaneous expenses 365,000 Administrative expenses 89,000 Income tax expense 295,000 3,339,000 Net income $ 1,343,000 1,450,000 490,000 79,000 19,000 165,000 753,000 697,000 $ STATEMENTS OF RETAINED EARNINGS $ $ Balance, January 1 Net income Dividends declared Balance, December 31 3,800,000 1,343,000 (590,000) 4,553,000 890,000 697,000 (290,000) 1,297,000 $ $

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.Cost of 80% investment Implied value of 100% $ $ 3,300,000 4,125,000 Common shares Retained earnings $ $ 2,050,000 445,000 $ $ 2,495,000 1,630,000 $ Acquisition differential Allocated: Inventory (20%) Equipment (40%) Balance - goodwill (40%) NCI (20% x 4,125,000) 326,000 652,000 $ 978,000 652,000 825,000 Amortization Schedule Balance Amortization Balance Jul 1 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Year 2 Year 2 Years 3 to 5 Year 6 Year 6 $ 326,000 $ 326,000 $ 652,000 $ 40,750 $ 244,500 $ 81,500 $ 285,250 $ 652,000 $ - $ 79,000 $ 29,000 $ 544,000 $ 1,630,000 $ 366,750 $ 323,500 $ 110,500 $ 829,250 Inventory Equipment Goodwill Calculation of consolidated net income attributable to Pearl's shareholders - Year 6 Net income Pearl Dividends from Silver (290,000*80%) $ $ $ 1,343,000 232,000 1,111,000 Net income Silver Less: Acquisition differential amortization $ $ $ 697,000 110,500 586,500 80% $ $ 469,200 1,580,200 $ 3,800,000 Calculation of consolidated retained earnings Jan.1, Year 6 Retained earnings Pearl – Jan. 1 Retained earnings Silver - Jan.1 Acquisition retained earnings Increase since acquisition Acq. diff. amort. to end of Year 5 ($366,750+$323,500) $ $ 890,000 -445,000 445,000 $ $ -690,250 -245,250 80% $ $ -196,200 3,603,800 Calculation of non-controlling interest - Dec.31, Year 6 Silver-Common Shares Retained earnings $ $ $ $ $ Unamortized acquisition differential 2,050,000 1,297,000 3,347,000 829,250 4,176,250 20% 835,250 $ Parta Pearl Company Consolidated Income Statement for the Year Ended December 31, Year 6 $ $ Sales (4,450,000 + 1,450,000) Cost of sales (2,590,000 + 490,000 + 81,500) Miscellaneous expense (365,000 + 79,000) Admin expense (89,000 + 19,000 + 29,000) Income tax (295,000 + 165,000) $ $ $ $ 5,900,000 3,161,500 444,000 137,000 460,000 4,202,500 1,697,500 Net income Attributable to: Pearl's shareholders Non-controlling interest [20%* (697,000-110,500)] $ $ $ 1,580,200 117,300 1,697,500 Pearl Company Consolidated Retained Earnings Statement for the Year Ended December 31, Year 6 Balance Jan. 1 Net income $ $ $ $ $ 3,603,800 1,580,200 5,184,000 -590,000 4,594,000 Dividends Balance Dec. 31 Pearl Company Consolidated Balance Sheet December 31, Year 6 $ $ Cash (390,000 + 190,000) Accounts receivable (290,000 -84,000) Inventory (2,450,000 + 510,000) Plant and equipment (3,450,000 + 3,590,000+ 652,000 - 69,000) Accumulated depreciation (840,000 + 400,000 + 366,750 -69,000) Goodwill 580,000 206,000 2,960,000 7,623,000 -1,537,750 544,000 10,375,250 $ $ $ Liabilities (737,000 + 543,000 - 84,000) Common shares Retained earnings Non-controlling interest $ $ $ $ 1,196,000 3,750,000 4,594,000 835,250 10,375,250 $ Part b Goodwill impairment loss-entity theory Less: NCI's share @20% Goodwill impairment loss-parent company extension theory 29,000 5,800 23,200 $ NCI-entity theory NCI's share of goodwill impairment loss NCI – parent company extension theory $ $ $ 117,300 5,800 123,100 $ Partc Goodwill-entity theory Less: NCI's share @20% Goodwill - parent company extension theory 544,000 108,800 435,200 $ NCI-entity theory NCI's share of goodwill impairment loss NCI - parent company extension theory $ $ 835,250 108,800 726,450 .

The following financial statements were prepared on D…

Answers

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. C

Calculation of non-controlling interest - Dec. 31, Year 6 Silver-Common Shares Retained earnings $ $ $ $ $ Unamortized acquis

Similar Solved Questions

1 answer

Exercise 9.13 For the following scenario, draw an ER Diagram. Identify attributes of each entity For...

Exercise 9.13 For the following scenario, draw an ER Diagram. Identify attributes of each entity For each entity, draw a table with a few test records. Identify how the tables are linked. The company sells products to customers. A sales order is created for each sales transaction. There can be multi...

The following financial statements were prepared on December 31, Year 6: Additional Information: Pearl purchased 80%...

Question:

Answers

Similar Solved Questions