On December 31, 2009, Jupiter Inc. purchased all of the shares of Europa Ltd. for $4,760,000. On that date, the carrying amount of Europa’s identifiable net assets was $4,080,000. The carrying amount of Europa’s identifiable net assets were equal to their fair values except that the carrying amount of Europa’s inventory was $2,000,000 while its fair value was $2,119,000, and Europa had unrecognized trademarks that were worth $138,000. On the acquisition date, Europa’s retained earnings were $1,080,000. The trademarks were being amortized over 6 years. During 2013, an impairment loss of $170,000 occurred for the goodwill. Prior to 2013 there had not been any goodwill impairment.

Following are separate entity financial statements for 2013:

Additional information:

1. On January 1, 2013, Europa loaned Jupiter $300,000, none of which has been paid back. Europa earned $12,000 in interest on the loan, which has been reported as investment income. The interest has not yet been received.

2. Europa regularly sells inventory to Jupiter at a price that earns a gross profit of 30% for Europa. During 2013 

Jupiter purchased $1,000,000 of inventory from Europa and $400,000 of it remained unsold at December 31, 2013. Jupiter did not have any inventory from Europa on hand.

3. On December 31, 2011, Europa had sold some equipment to Jupiter for $700,000 (equipment is still being used by Jupiter). Europa’s carrying amount for this equipment just prior to its sale was $400,000. The remaining useful life of the equipment was 15 years on the date of the sale.

4. Land that originally cost $390,000 had been sold by Jupiter to Europa in 2011 for $490,000. This land is still held by Europa at December 31, 2013.

5. The tax rate is 40%

Required

Prepare Jupiter’s consolidated balance sheet as at December 31, 2013.

Transcribed Image Text:

JUPITER INC. & EUROPA LTD. Statements of Income and Retained Earnings year ended December 31, 2013 Jupiter Europa $12,280,000 240,000 $7,370,000 12,000 Sales Investment income 12,520,000 7,382,000 Cost and expenses Cost of goods sold Depreciation and amortization expense Interest expense Other expenses Income tax expense 5,159,000 350,000 152,000 7,859,000 531,000 212,000 793,000 1,250,000 356,000 546,000 6,563,000 10,645,000 819,000 1,300,000 Net income 1,875,000 Retained earnings, beginning of year 1,722,000 2,119,000 240,000 3,597,000 625,000 Dividends Retained earnings, end of year $ 2,972,000 $1,879,000 JUPITER INC. & EUROPA LTD. Balance Sheets December 31, 2013 Jupiter Europa Assets $ 1,516,000 4,124,000 4,716,000 $ 976,000 2,850,000 Cash and receivables Inventory Investment in Europa Loan to Jupiter (non-current) Property, plant and equipment (net) 300,000 5,756,000 4,716,000 $15,116,000 $9,882,000 Liabilities and shareholders' equity $ 2,844,000 $1,203,000 3,800,000 3,000,000 1,879,000 Current liabilities Long-term liabilities 5,300,000 4,000,000 2,972,000 Common shares Retained earnings $15,116,000 $9,882,000