Financial statements of Par Corp. and its subsidiary Star Inc. on December 31, Year 12, are...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Financial statements of Par Corp. and its subsidiary Star Inc. on December 31, Year 12, are shown below: BALANCE SHEETS At December 31, Year 12 Cash Accounts receivable Inventories Land Plant and equipment Accumulated depreciation Investment in Star common shares Accounts payable Accrued liabilities Preferred shares Common shares Retained earnings Par Star $ 55,000 $ 115,000 2,500 100,000 84,600 63,000 45,000 85,000 500,000 850,000 (195,000) (315,000) 229,600 $ 834,200 $ 785,500 $ 98,000 $ 195,000 9,500 13,000 - 65,000 450,000 170,000 276,700 342,500 $ 834,200 $ 785,500 RETAINED EARNINGS STATEMENTS For the Year Ended December 31, Year 12 Star Par $286,700 $403,500 29,000 (26,000) Balance, January 1 Net income (loss) Dividends Balance, December 31 315,700 377,500 (39,000) (35,000) $276,700 $342,500 Other Information On January 1, Year 5, the balance sheet of Star showed the following shareholders' equity: $8 cumulative preferred shares, 500 shares issued Common shares, 2,000 shares issued. Deficit (Note 1) $ 65,000 170,000 (95,000) $140,000 Note 1: Dividends on preferred shares are two years in arrears. On this date, Par acquired 1,400 common shares of Star for a cash payment of $229,600. The fair values of Star's identifiable net assets differed from carrying amounts only with respect to the following: Accounts receivable Inventory Plant Carrying amount $ 49,000 59,000 570,000 Fair value $ 47,000 66,000 620,000 Long-term liabilities. 328,000 348,000 The plant had an estimated remaining useful life of five years on this date, and the long-term liabilities had a maturity date of December 30, Year 12. Any goodwill is to be tested annually for impairment. Both Par and Star make substantial sales to each other at an intercompany selling price that yields the same gross profit as the sales they make to unrelated customers. Intercompany sales in Year 12 were as follows: Par to Star Star to Par $ 340,000 375,000 During Year 12, Par billed Star $2,000 per month in management fees. At year-end, Star had paid for all months except for December. The January 1, Year 12, inventories of the two companies contained unrealized intercompany profits as follows: Inventory of Par Inventory of Star $ 29,000 28,000 The December 31, Year 12, inventories of the two companies contained unrealized intercompany profits as follows: Inventory of Par Inventory of Star $ 50,000 52,000 On July 1, Year 7, Star sold equipment to Par for $74,000. The equipment had a carrying amount in the records of Star of $54,000 on this date and an estimated remaining useful life of five years. Goodwill impairment losses were recorded as follows: Year 7, $82,000; Year 9, $50,970; and Year 12, $20,460. Assume a 40% corporate tax rate. Par has accounted for its investment in Star by the cost method. All dividends in arrears were paid by December 31, Year 11. Required: (a) Prepare, with all necessary calculations, the following: (i) Year 12 consolidated retained earnings statement. (Input all amounts as positive values. Omit $ sign in your response.) Par Corp. Consolidated Retained Earnings Statement Year Ended December 31, Year 12 Balance January 1 Net loss Dividends $ Balance December 31 $ (ii) Consolidated balance sheet as at December 31, Year 12. Assets Par Corp. Consolidated Balance Sheet as at December 31, Year 12 $ 0 Liabilities and Equity $ 0 (b) How would the return on equity attributable to Par's shareholders for Year 12 change if Star's preferred shares were non-cumulative instead of cumulative? No Change O Change (c) On January 1, Year 13, Star issued common shares for $100,000 in cash. Because Par did not purchase any of these shares, Par's ownership percentage declined from 70 to 56 %. Calculate the gain or loss that would be charged or credited to consolidated shareholders' equity as a result of this transaction. (Input all amounts as positive values. Round intermediate calculations and final answer to nearest dollar amount. Omit $ sign in your response.) (Click to select) Financial statements of Par Corp. and its subsidiary Star Inc. on December 31, Year 12, are shown below: BALANCE SHEETS At December 31, Year 12 Cash Accounts receivable Inventories Land Plant and equipment Accumulated depreciation Investment in Star common shares Accounts payable Accrued liabilities Preferred shares Common shares Retained earnings Par Star $ 55,000 $ 115,000 2,500 100,000 84,600 63,000 45,000 85,000 500,000 850,000 (195,000) (315,000) 229,600 $ 834,200 $ 785,500 $ 98,000 $ 195,000 9,500 13,000 - 65,000 450,000 170,000 276,700 342,500 $ 834,200 $ 785,500 RETAINED EARNINGS STATEMENTS For the Year Ended December 31, Year 12 Star Par $286,700 $403,500 29,000 (26,000) Balance, January 1 Net income (loss) Dividends Balance, December 31 315,700 377,500 (39,000) (35,000) $276,700 $342,500 Other Information On January 1, Year 5, the balance sheet of Star showed the following shareholders' equity: $8 cumulative preferred shares, 500 shares issued Common shares, 2,000 shares issued. Deficit (Note 1) $ 65,000 170,000 (95,000) $140,000 Note 1: Dividends on preferred shares are two years in arrears. On this date, Par acquired 1,400 common shares of Star for a cash payment of $229,600. The fair values of Star's identifiable net assets differed from carrying amounts only with respect to the following: Accounts receivable Inventory Plant Carrying amount $ 49,000 59,000 570,000 Fair value $ 47,000 66,000 620,000 Long-term liabilities. 328,000 348,000 The plant had an estimated remaining useful life of five years on this date, and the long-term liabilities had a maturity date of December 30, Year 12. Any goodwill is to be tested annually for impairment. Both Par and Star make substantial sales to each other at an intercompany selling price that yields the same gross profit as the sales they make to unrelated customers. Intercompany sales in Year 12 were as follows: Par to Star Star to Par $ 340,000 375,000 During Year 12, Par billed Star $2,000 per month in management fees. At year-end, Star had paid for all months except for December. The January 1, Year 12, inventories of the two companies contained unrealized intercompany profits as follows: Inventory of Par Inventory of Star $ 29,000 28,000 The December 31, Year 12, inventories of the two companies contained unrealized intercompany profits as follows: Inventory of Par Inventory of Star $ 50,000 52,000 On July 1, Year 7, Star sold equipment to Par for $74,000. The equipment had a carrying amount in the records of Star of $54,000 on this date and an estimated remaining useful life of five years. Goodwill impairment losses were recorded as follows: Year 7, $82,000; Year 9, $50,970; and Year 12, $20,460. Assume a 40% corporate tax rate. Par has accounted for its investment in Star by the cost method. All dividends in arrears were paid by December 31, Year 11. Required: (a) Prepare, with all necessary calculations, the following: (i) Year 12 consolidated retained earnings statement. (Input all amounts as positive values. Omit $ sign in your response.) Par Corp. Consolidated Retained Earnings Statement Year Ended December 31, Year 12 Balance January 1 Net loss Dividends $ Balance December 31 $ (ii) Consolidated balance sheet as at December 31, Year 12. Assets Par Corp. Consolidated Balance Sheet as at December 31, Year 12 $ 0 Liabilities and Equity $ 0 (b) How would the return on equity attributable to Par's shareholders for Year 12 change if Star's preferred shares were non-cumulative instead of cumulative? No Change O Change (c) On January 1, Year 13, Star issued common shares for $100,000 in cash. Because Par did not purchase any of these shares, Par's ownership percentage declined from 70 to 56 %. Calculate the gain or loss that would be charged or credited to consolidated shareholders' equity as a result of this transaction. (Input all amounts as positive values. Round intermediate calculations and final answer to nearest dollar amount. Omit $ sign in your response.) (Click to select)
Expert Answer:
Answer rating: 100% (QA)
a i Year 12 consolidated retained earnings statement Par Corp Consolidated Retained Earnings Stateme... View the full answer
Related Book For
Modern Advanced Accounting in Canada
ISBN: 978-1259087554
8th edition
Authors: Hilton Murray, Herauf Darrell
Posted Date:
Students also viewed these accounting questions
-
How does the Virgin Group as a corporate parent add value to its businesses? To what extent are these parenting skills relevant to the differing businesses units?
-
A whispering chamber is an elliptically arched chamber. A unique feature of a whispering chamber is that when a person standing at one focus of the ellipse whispers, he can be heard by a person...
-
Financial statements of Par Corp. and its subsidiary Star Inc. on December 31, Year 12, are shown below: Other Information ¢ On January 1, Year 5, the balance sheet of Star showed the following...
-
Physical Science the table shows equivalent Fahrenheit and Celsius temperatures. Degrees Fahrenheit Degrees Celsius 32 ................... 0 68 ................. 20 104 ................. 40 140...
-
In Example 1, let the juvenile survival rate be 2/5, and let the reproduction rate be 2. What values of the adult survival rate will ensure that the population stabilizes?
-
True Or False Some courts bypass parent-child immunity when an intentional tort or business activity is involved.
-
3. During the course of 10 months, Joseph Melle sent more than 60 million unsolicited e-mail advertisements to AOL members. What charges could be brought against him?
-
Marston Marble Corporation is considering a merger with the Conroy Concrete Company. Conroy is a publicly traded company, and its current beta is 1.30. Conroy has been barely profitable, so it has...
-
You are going to value Lauryn??s Doll Co. using the FCF model.After consulting various sources, you find that Lauryn's has areported equity beta of 1.5, a debt-to-equity ratio of .4, and atax rate 2...
-
Coca Cola (KO) price is $61/share. The company is expected to pay dividend of $1.7/share next year. (In reality, dividends are paid quarterly. In this question we will assume for simplicity that all...
-
What situations or triggers can be responsible for behaviours of concern? List at least four possibilities.
-
On 20 October 2023, Jude walked past a child JayJay whom he did not know previously, and because he was in a hurry to catch the train to work, Jude could not stop to rescue Jayjay who later suffered...
-
Solve for x. Graph the solution. 7x+34x-9 What is the solution? (Type your answer in interval notation. Use integers or fractions for any numbers in the expression.)
-
What are the consequences of private sector organizations providing services that are traditionally within the public sector such as housing and transportation?
-
2. It is given that there is an object in an image, whose location is represented by a bounding box. An object detector is used to detect the object in the image. In the object detector, a bounding...
-
[cos 2) LetAsin 0 0 sin cos 0 0 0 0 .If A satisfies AAT = 1, then k + 1 5
-
Epson produces color cartridges for inkjet printers. Suppose cartridges are sold to mail - order distributors for $ 5 . 2 0 each. Total fixed costs per year are $ 7 5 2 , 4 0 0 . Variable cost per...
-
Express these numbers in standard notation. a. 2.87 10-8 b. 1.78 1011 c. 1.381 10-23
-
"If the translation of a foreign operation produced a gain under the FCT method, the translation of the same company could produce a loss if the operation were translated under the PCT method." Do...
-
On January 2, Year 4, Brady Ltd. purchased 80% of the outstanding shares of Partridge Ltd. for $4,320,000. Partridge's statement of financial position and the fair values of its identifiable assets...
-
It is January 20, Year 13. Mr. Neely, a partner in your office, wants to see you, CPA, about Bruin Car Parts Inc. (BCP), a client req_uiring assistance. BCP prepares its financial statements in...
-
Determine which of -38 and 27 is larger using a number line, and express that using both the greater than and the less than notations.
-
Graph the following numbers on the number line: 1. -10 2. 4 3. 0
-
Use your calculator to calculate 38 - 100. Explain how the answer agrees with what was expected.
Study smarter with the SolutionInn App