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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 $3,480,000, and retained earnings of $2,110,000. When acquired, Devine had inventories with fair values $90,000 less than carrying amount, a parcel of land with a fair value $210,000 greater than the carrying amount, and equipment with a fair value $210,000 less than carrying amount. There were also internally generated patents with an estimated market value of $410,000 and a five-year remaining life. A long-term liability had a market value $110,000 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 $510,000 at the date of acquisition. The year 11 financial statements for Vine and Devine were as follows: INCOME STATEMENTS For year ending December 31, Year 11 (in thousands of dollars) Sales Dividends, investment income and gains Total income Cost of goods sold Other expenses Income taxes Total expenses Profit Vine $11,800 600 12,400 8,300 500 Devine $ 3,200 1,200 4,400 1,700 500 200 (2,400) $ 2,000 200 (9,000 $ 3,400 Devine $ 2,500 12,eee (4,800) STATEMENTS OF FINANCIAL POSITION December 31, Year 11 (in thousands of dollars) Vine Land $ 6,000 Plant and equipment 19, eee Accumulated depreciation (5,600) Investment in Devine, cost 5,010 Inventories 4,800 Cash and current receivables 1,120 Total assets $30, 330 Ordinary shares $1 , Retained earnings 11,800 Long-term liabilities 6,800 Deferred income taxes 400 Current liabilities Total equity and liabilities $30, 330 2,600 see $12,800 $ 3,480 6,800 1,300 100 1,120 $12,800 1,330 Additional Information . 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 $410,000. Sales of finished goods from Vine to Devine totalled $1,010,000 in Year 10 and $2,010,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 33 1/3% to the Vine Company. Devine's December 31, Year 10, inventory contained $303,000 of these sales; December 31. Year 11, inventory contained $603,000 of these sales. Sales of finished goods from Devine to Vine were $810,000 in Year 10 and $1.210,000 in Year 11. These sales were priced to gross profit margin on selling price of 40% to the Devine Company. Vine's December 31, Year 10, inventory contained $110,000 of these sales; the December 31, Year 11, inventory contained $510,000 of these sales. Vine's investment in Devine's account is carried in accordance with the cost method and includes advances to Devine of $210,000, 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 provide a (a) The allocation of the acquisition cost at acquisition and the related changes to acquisition differential schedule. (Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in dollars, not in thousands of dollars. Input all values as positive numbers. Do not round gross profit percentage for intermediate computations. Omit $ sign in your response.) $ Acquisition cost Allocation Acquisition January 1, Year 7 Cost Implied value of 100% investment $ Current Assets:Ordinary Shares Retained Earnings Acquisition differential Life 1 Cr Allocation: Inventory Land Equipment Patents Long - term Liability Subtotal Balance: Goodwill Dr Cr Dr 10 5 Cr 4 Dr Dr Dr Changes to Acquisition Differential Table: Allocation Life Changes Balance Dec. 3, YR 11 YR 7 - YR 10 YR 11 Cr 1 Dr Dr Dr Cr Dr Inventory Land Equipment Patents Long - term liability Goodwill Cr Dr Cr 10 5 Dr Cr Cr 4 Dr Dr Dr Dr Cr Cr Dr (b) Prepare a consolidated income statement with expenses classified by function. (Enter your answers in dollars, not in thousands of dollars. Do not round gross profit percentage for intermediate computations. Input all values as positive numbers.) Consolidated Income Statement For the Year Ending December 31, Year 11 Total expenses Attributable to: Shareholders of Vine Non-controlling interests 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 $3,480,000, and retained earnings of $2,110,000. When acquired, Devine had inventories with fair values $90,000 less than carrying amount, a parcel of land with a fair value $210,000 greater than the carrying amount, and equipment with a fair value $210,000 less than carrying amount. There were also internally generated patents with an estimated market value of $410,000 and a five-year remaining life. A long-term liability had a market value $110,000 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 $510,000 at the date of acquisition. The year 11 financial statements for Vine and Devine were as follows: INCOME STATEMENTS For year ending December 31, Year 11 (in thousands of dollars) Sales Dividends, investment income and gains Total income Cost of goods sold Other expenses Income taxes Total expenses Profit Vine $11,800 600 12,400 8,300 500 Devine $ 3,200 1,200 4,400 1,700 500 200 (2,400) $ 2,000 200 (9,000 $ 3,400 Devine $ 2,500 12,eee (4,800) STATEMENTS OF FINANCIAL POSITION December 31, Year 11 (in thousands of dollars) Vine Land $ 6,000 Plant and equipment 19, eee Accumulated depreciation (5,600) Investment in Devine, cost 5,010 Inventories 4,800 Cash and current receivables 1,120 Total assets $30, 330 Ordinary shares $1 , Retained earnings 11,800 Long-term liabilities 6,800 Deferred income taxes 400 Current liabilities Total equity and liabilities $30, 330 2,600 see $12,800 $ 3,480 6,800 1,300 100 1,120 $12,800 1,330 Additional Information . 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 $410,000. Sales of finished goods from Vine to Devine totalled $1,010,000 in Year 10 and $2,010,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 33 1/3% to the Vine Company. Devine's December 31, Year 10, inventory contained $303,000 of these sales; December 31. Year 11, inventory contained $603,000 of these sales. Sales of finished goods from Devine to Vine were $810,000 in Year 10 and $1.210,000 in Year 11. These sales were priced to gross profit margin on selling price of 40% to the Devine Company. Vine's December 31, Year 10, inventory contained $110,000 of these sales; the December 31, Year 11, inventory contained $510,000 of these sales. Vine's investment in Devine's account is carried in accordance with the cost method and includes advances to Devine of $210,000, 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 provide a (a) The allocation of the acquisition cost at acquisition and the related changes to acquisition differential schedule. (Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in dollars, not in thousands of dollars. Input all values as positive numbers. Do not round gross profit percentage for intermediate computations. Omit $ sign in your response.) $ Acquisition cost Allocation Acquisition January 1, Year 7 Cost Implied value of 100% investment $ Current Assets:Ordinary Shares Retained Earnings Acquisition differential Life 1 Cr Allocation: Inventory Land Equipment Patents Long - term Liability Subtotal Balance: Goodwill Dr Cr Dr 10 5 Cr 4 Dr Dr Dr Changes to Acquisition Differential Table: Allocation Life Changes Balance Dec. 3, YR 11 YR 7 - YR 10 YR 11 Cr 1 Dr Dr Dr Cr Dr Inventory Land Equipment Patents Long - term liability Goodwill Cr Dr Cr 10 5 Dr Cr Cr 4 Dr Dr Dr Dr Cr Cr Dr (b) Prepare a consolidated income statement with expenses classified by function. (Enter your answers in dollars, not in thousands of dollars. Do not round gross profit percentage for intermediate computations. Input all values as positive numbers.) Consolidated Income Statement For the Year Ending December 31, Year 11 Total expenses Attributable to: Shareholders of Vine Non-controlling interests