During 2005, the following transactions occurred between Regina Ltd. and Dakota Ltd. (see SSP5—1):

a. Regina lent $50,000 at 10% interest to Dakota Ltd. on July 1, 2005, for one year. The interest was unpaid at December 31, 2005.

b. During 2005, Regina purchased inventory from Dakota at a cost of $400,000; $100,000 oft hat amount was still in Regina’s inventory at the end of 2005.

c. During 2005, Dakota purchased inventory of $200,000 from Regina; $40,000 of that amount was still in Dakota’s inventory at the end of 2005.

Other Information:

d. Dakota’s building and equipment were estimated to have remaining useful lives from January 10, 2005, of 10 and 5 years, respectively. Straight-line depreciation is being used.

e. There has been no impairment of goodwill.

f. No fixed assets were sold or written off during 2005.

The December 31, 2005, separate-entity financial statements for both companies are shown in Exhibit 5-16.

Required:

Prepare the consolidated statement of income and retained earnings and the consolidated balance sheet for Regina Ltd. for the year ended December 31, 2005.

Data from SSP1

On January 10, 2005, Regina Ltd. acquired 60% of the shares of Dakota Ltd. by issuing common shares valued at $150,000. Prior to the acquisition of Dakota, Regina's balance sheet appeared as shown in Exhibit 5-14. The balance sheet of Dakota Ltd. at the date of acquisition is shown in Exhibit 5-15.

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EXHIBIT 9-15 REGINA LTD. AND DAKOTA LTD. Current assets: Cash Accounts and other receivables Inventories Capital assets Land Buildings Accumulated depreciation Equipment Accumulated depreciation Balance Sheets December 31, 2005 Other assets Investment in Dakota Ltd. (at cost) Total assets Liabilities Current accounts payable and accrued liabilities Long-term liabilities Shareholders' equity Common shares Retained earnings Regina Ltd. $ 28,000 110,000 160,000 298,000 300,000 (45,000) 200,000 (80,000) 375,000 150,000 $823,000 $ 40,000 65,000 105,000 370,000 348,000 718,000 $ 823,000 Dakota Ltd. $ 10,000 30,000 60,000 100,000 135,000 150,000 (60,000) 130,000 (90,000) 265,000 $365,000 $80,000 50,000 130,000 100,000 135,000 235,000 $365,000