On January 1, 20X5, Paco Ltd. purchased 70% of the common shares of Scot Ltd. for $506,100.

Financial data for Scot Ltd. are as follows:

Additional Information

1. Accounts receivable will be collected within the year.

2. Inventory is on the FIFO method and has a turnover of two times per year.

3. The capital assets are being written off over 10 years on a straight-line basis.

4. Any goodwill on the purchase will be tested for impairment on an annual basis.

5. The bond discount is being amortized over the remaining 10 years on a straight-line basis. Interest is payable semi-annually.

6. The preferred shares are non-cumulative, non-participating, and redeemable at par ($100) plus a $2 premium.

During the year, the consolidated entity had the following intercompany transactions:

1. Scot Ltd. sold a building, which had a cost of $300,000 and had accumulated depreciation of $180,000 at the date of sale, to Paco Ltd. for $195,000 cash. (This building was being depreciated over 10 years straight-line with no residual value, but no depreciation had been recorded for the year 20X5 to the date of sale.) It is company policy that assets receive a full year€™s depreciation in the year of acquisition and none in the year of disposal. It is also company policy that the acquiring company amortize the asset over the remaining life of the asset.

2. On July 1, 20X5, Paco Ltd. purchased one-half of the bonds payable of Scot Ltd. for $107,250. It is company policy that the purchaser be allocated any gain or loss on an intercompany transaction of this nature.

3. On September 1, 20X5, Paco Ltd. sold land costing $135,000D to Scot Ltd. for $175,000.

4. To date, there has been no impairment to value of goodwill.

Financial statements of Paco Ltd. and Scot Ltd. as at December 31, 20X5, are:

Required

a. Prepare the consolidated statement of comprehensive income for the year 20X5.

b. Calculate the following, as they would appear on the consolidated statement of financial position at December 31, 20X5:

i) inventory;

ii) capital assets (net);

iii) bond discount; and

iv) non-controlling interest.

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Scot Ltd. Statement of Financial Position January 1, 20X5 Carrying value $ 56,000 Fair value $ 56,000 Cash Accounts receivable 102,000 108,000 180,000 Inventory 197,000 Capital assets, net 750,000 700,000 $1,105,000 $ 140,000 Current liabilities 140,000 Long-term liabilities Bonds payable at 12% interest Bond discount 300,000 300,000 (60,000) (60,000) Preferred shares 175,000 Common shares 200,000 Retained earnings 350,000 $1,105,000 Statements of Financial Position, December 31, 20X5 Paco Ltd. $ 145,500 Scot Ltd. $ 85,000 200,000 Cash Accounts receivable 300,000 Inventory 500,000 400,000 Bond investment 109,500 Capital assets, net Investment in subsidiary (cost) 1,000,000 800,000 506,100 $2,561,100 $ 100,000 $1,485,000 $ 331,000 Current liabilities Long-term liabilities Bonds payable at 12% interest 300,000 Bond discount (54,000) Preferred shares 175,000 Common shares 400,000 200,000 Retained earnings 2,061,100 533,000 $1,485,000 $2,561,100