(a) Show the allocation of the acquisition cost at acquisition and the related amortization schedule. Show and label all calculations.

(b) Prepare a consolidated income statement with expenses classified by function. 

(c) Calculate consolidated retained earnings at December 31, Year 11.

(d) Prepare a consolidated statement of financial position for Vine Company at December 31, Year 11.

(e) Assume that Devine's shares were trading at $75 per share shortly before and after the date of acquisition, and that this data was used to value non-controlling interest at the date of acquisition. Calculate goodwill and non-controlling interest at December 31, Year 11.

(f) Prepare the consolidated financial statements using the worksheet approach.

On January 1, Year 7, the Vine Company purchased 60,000 of the 80,000 ordinary shares of the Devine Company for $80 per share. On that date, Devine had ordinary shares of $3,440,000, and retained earnings of $2,170,000. When acquired, Devine had inventories with fair values $300,000 less than carrying amount, a parcel of land with a fair value $270,000 greater than the carrying amount, and equipment with a fair value $270,000 less than carrying amount. There were also internally generated patents with an estimated market value of $470,000 and a five year remaining life. A longterm liability had a market value $170,000 greater than carrying amount; this liability was paid off December 31, Year 10. All other identifiable assets and liabilities of Devine had fair values equal to their carrying amounts. Devine's accumulated depreciation on the plant and equipment was $570,000 at the date of acquisition.

At the acquisition date, the equipment had an expected remaining useful life of ten years. Both companies use the straight-line method for all depreciation and amortization calculations and the FIFO inventory cost flow assumption. Assume a 40% income tax rate on all applicable items and that
there were no impairment losses for goodwill. 

On September 1, Year 11, Devine sold a parcel of land to Vine and recorded a total non-operating gain of $470,000.

Sales of finished goods from Vine to Devine totalled $1,070,000 in Year 10 and $2,070,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 33¥3% to the Vine Company. Devine's December 31, Year 10, inventory contained $321,000 of these sales; December 31, Year 11, inventory contained $621,000 of these sales. 

Sales of finished goods from Devine to Vine were $870,000 in Year 10 and $1,270,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 40% to the Devine Company. Vine's December 31, Year 10, inventory contained $170,000 of these sales; the December 31, Year 11, inventory contained $570,000 of these sales.

Vine's investment in Devine's account is carried in accordance with the cost method and includes advances to Devine of $270,000, which are also included in current liabilities.

There are no intercompany amounts other than those noted, except for the dividends of $500,000 (total amount) declared and paid by Devine.

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INCOME STATEMENTS For year ending December 31, Year 11 (in thousands of dollars) Vine Devine $13,000 $4,400 Sales Dividends, investment income, and gains 1,800 2,400 Total income 14,800 6,800 Cost of goods sold 10,100 2,900 Other expenses 500 500 200 Income taxes 200 Total expenses 10,800 $ 4,000 3,600 Profit $3,200 STATEMENTS OF FINANCIAL POSITION December 31, Year 11 (in thousands of dollars) Vine Devine $ 6,000 $ 2,500 Land Plant and equipment 20,200 13,200 Accumulated depreciation (4,400) (3,600) Investment in Devine, cost 5,070 6,000 Inventories 3,800 2,360 $35,230 Cash and current receivables 1,700 $17,600 Total assets $ 3,440 Ordinary shares $10,000 10,600 Retained earnings 5,600 Long-term liabilities 8,000 2,500 Deferred income taxes 1,600 100 5,030 Current liabilities 5,960 $35,230 Total equity and liabilities $17,600