On June 30, 20X1, Punt Corporation acquired 70% of the outstanding common shares of Slide Ltd. for $3,210,000 in cash plus Punt Corporation common shares estimated to have a fair market value of $1,200,000. On the date of acquisition, the fair market value and carrying value of each of Slide Ltd.€™s assets were generally equal, except for inventory, which was undervalued by $225,000, and capital assets (net), which was overvalued by $1,000,000. The shareholders€™ equity of Slide at that time was $3,440,000, consisting of:

Common shares.....................$2,900,000

Retained earnings.......................540,000

.................................................$3,440,000

Statements of financial position at June 30, 20X5, are as follows:

Additional Information

1. Slide Ltd. had income of $1,460,000 for the year ended June 30, 20X5. Dividends of $480,000 were declared during the fiscal year but were not paid until August 12, 20X5.

2. Slide Ltd. has had an average inventory turnover of four times per year over the past decade.

3. The capital assets that were overvalued on the date of acquisition had a remaining useful life of 20 years.

4. Slide sold goods to Punt during the year ended June 30, 20X4, at a gross profit margin of 25%. The opening inventory of Punt at July 1, 20X4, included items purchased from Slide in the amount of $160,000. There were no sales from Slide to Punt during the year ended June 30, 20X5.

5. Punt sold goods to Slide Ltd. during the current fiscal year at a gross profit margin of 30%. Of the $750,000 of sales, goods worth $200,000 were in Slide€™s closing inventory at June 30, 20X5. None of these intercompany sales still in inventory had been paid for at the fiscal year-end.

6. Both companies follow the straight-line method for depreciating capital assets.

7. The controller of Punt has informed you that, to date, there has been no impairment in goodwill.

Required

Prepare the consolidated statement of financial position for Punt Corporation and its subsidiary, Slide Ltd., at June 30, 20X5.

Transcribed Image Text:

Punt Corp. Slide Ltd. Assets $ 4,548,000 $ 321,000 Cash and marketable securities Accounts and other receivables 2,153,000 950,000 Inventory 2,940,000 1,206,000 Capital assets (net) 17,064,000 7,161,000 Other long-term investments 3,038,000 2,240,000 Investment in Slide Ltd. 4,410,000 Total assets $34,153,000 $11,878,000 Liabilities $ 3,025,000 $ 2,090,000 Current liabilities Mortgage note payable 12,135,000 4,000,000 Total liabilities 15,160,000 6,090,000 Shareholders' equity Common shares 10,000,000 2,900,000 Retained earnings 8,993,000 2,888,000 Total shareholders' equity 18,993,000 5,788,000 Total liabilities and shareholders' equity $34,153,000 $11,878,000