a ACCT 5510 final Spr 203 x + V - X > 0 file:///C:/Users/user/Desktop/ACCT%205510%20final%20Spr%202020%20V2.pdf Question 3. (51 marks) PAR Company (PAR) purchased 66% of the outstanding common shares of SUB Company on December 31, Year 5, for $105,000. At that date, SUB had common shares outstanding, which had been issued for $100,000, and retained earnings of $30,000. Both companies use the straight-line method for capital assets and bonds. SUB $ 20,000 80,000 90,000 The condensed financial statements were as follows: Balance Sheets At December 31, Year 9 PAR Assets: Cash $ 10,000 Accounts receivable 100,000 Inventories 85.600 Investment in Sub common shares 105,000 Land 49,400 Capital assets 85,000 Accumulated depreciation 20.000 $415.000 Liabilities and Equities: Accounts payable $ 40,000 Other current liabilities 20,000 Bonds payable Common shares 300,000 Preferred shares Retained earnings 55,000 $ 415,000 12,000 104,000 25,000 $ 281.000 $ 30,400 5,000 50,600 100,000 20,000 75.000 $ 281,000 Statements of Income and Retained Earnings For year ended December 31, Year 9 PAR $420,000 9 e SUB $280,000 Sales 11 Type here to search O EL A U 8:29 PM 2020-04-22 0 . 4. ENG - X a > ACCT 5510 final Spr 203 x + V 0 file:///C:/Users/user/Desktop/ACCT%205510%20final%20Spr%202020%20V2.pdf 4 of 8 lo Other current liabilities - + 20.000 fit to page ID Page view 5.000 A Read aloud 20,000 L Add notes 6 A Preferred shares Retained earnings 75.000 55.000 S415.000 $281.000 Statements of Income and Retained Earnings For year ended December 31, Year 9 PAR Sales $420,000 Other Income 27,000 447,000 Cost of goods sold 316,000 Depreciation expense 21,000 Other expenses 36,000 Income tax expense 26.000 Net income 48,000 Retained earnings, beginning 25,000 Dividends (18,000) Retained earnings, ending $ 55.000 SUB $280,000 30,000 310,000 240,000 10,000 15,000 19,000 26,000 59,000 (10,000) $ 75.000 11 Type here to search O EL 9 e A U 8:29 PM 2020-04-22 0 . 4. ENG a ACCT 5510 final Spr 203 x + V - X > 0 file:///C:/Users/user/Desktop/ACCT%205510%20final%20Spr%202020%20V2.pdf Additional Information 1. Both companies pay tax at the rate of 40%. 2. PAR provided consulting services to the SUB for $4,000 during Year 9. 3. On December 31, Year 8, SUB's inventory included $45,000 of inventory purchased from PAR. Sales to SUB were priced at 20% markup on sales. 4. SUB sold $100,000 of inventory to PAR during Year 9. At December 31, Year 9, 70% of this inventory was sold. PAR had not paid SUB for $9,000 of the sales at December 31, Year 9. SUB charges a 25% gross profit margin on sales to PAR. 5. On July 1, Year 7. PAR purchased a parcel of land from SUB for $6,000. The land originally cost SUB $10,000. In Year 9, PAR sold 40% of this land to an outsider. 6. On April 1, Year 8, SUB sold a building to PAR for $25,000. The building's carrying value was $15,000 on this date. PAR estimated the remaining life of the building was 10 years at the time of the purchase from SUB. 7. On January 1, Year 7, 520,000 of 3% cumulative preferred shares, redeemable at 1.06, were issued by SUB. PAR purchased none of the preferred shares. Dividends were last declared and paid December 31, Year 7. Calculation and allocation of Acquisition differential: Cost of 66% of SUB $105,000 Implied value (105,000/.66) 159,091 Book value of SUB: Common shares $100,000 Retained earnings 30.000 130.000 O EL 9 e 11 Type here to search Q A 0 I 8:30 PM 2020-04-22 40 ENG a ACCT 5510 final Spr 203 x + V - X > 0 file:///C:/Users/user/Desktop/ACCT%205510%20final%20Spr%202020%20V2.pdf declared and paid December 31, Year 1. Calculation and allocation of Acquisition differential: Cost of 66% of SUB $105,000 Implied value (105,000/.66) 159,091 Book value of SUB: Common shares $100,000 Retained earnings 30,000 130.000 Acquisition differential 29,091 Allocated: Capital assets 24,000 Bonds payable (12,000) 12,000 Balance - goodwill $ 17,091 Acquisition differential amortization and goodwill impairment schedule at Capital assets (8) Bonds payable (10) Goodwill Total Balance at Amortization Acquisition Impairment Dec. 31' Yr 5 Yr 6-Yr 8 $ 24,000 $9,000 (12,000) (3,600) 17,091 5,000 $ 29,091 10,400 Amortization/ Remaining Impairment Year 9 Dec. 31 'Yr 9 $ 3,000 $ 12,000 (1,200) (7,200) 2,000 10,091 $ 3,800 $ 14,891 1 Type here to search O - 9 e ^ U 8:30 PM 44 ENG 2020-04-22 0 a ACCT 5510 final Spr 203 x + V - X > 0 file:///C:/Users/user/Desktop/ACCT%205510%20final%20Spr%202020%20V2.pdf ACCT 5510 Final V2 Spr 2020 Required: Round calculations to the nearest dollar a) Prepare the 3rd schedule: Intercompany profit, gains and losses (6 marks) b) Calculate the following amounts on the consolidated income statement for the year ended December 31, Year 9: (26 marks) (3.5) i) Cost of goods sold (12) ii) Consolidated Net income (Note: show the allocation of Consolidated NI to the Parent, NCI for common and NCI for preferred) (4.5) iii) Income tax expense (3.5) iv) Other income (2.5) v) Depreciation expense c) Calculate the following amounts on the consolidated balance sheet at December 31, Year 9: (19 marks) (2.5) i) Capital assets (2.5) ii) Accumulated depreciation (1.5) iii) Land (7) iv) Noncontrolling interest (show common and preferred separately) (1) V) Accounts receivable (1) vi) Bonds payable (3.5) vii) Deferred income tax (must indicate if asset or liability Show all calculations and amounts in brackets for the consolidated statements line items for any marks 11 Type here to search O E 9 e A U 8:30 PM 2020-04-22 0 . 4. ENG a ACCT 5510 final Spr 203 x + V - X > 0 file:///C:/Users/user/Desktop/ACCT%205510%20final%20Spr%202020%20V2.pdf Question 3. (51 marks) PAR Company (PAR) purchased 66% of the outstanding common shares of SUB Company on December 31, Year 5, for $105,000. At that date, SUB had common shares outstanding, which had been issued for $100,000, and retained earnings of $30,000. Both companies use the straight-line method for capital assets and bonds. SUB $ 20,000 80,000 90,000 The condensed financial statements were as follows: Balance Sheets At December 31, Year 9 PAR Assets: Cash $ 10,000 Accounts receivable 100,000 Inventories 85.600 Investment in Sub common shares 105,000 Land 49,400 Capital assets 85,000 Accumulated depreciation 20.000 $415.000 Liabilities and Equities: Accounts payable $ 40,000 Other current liabilities 20,000 Bonds payable Common shares 300,000 Preferred shares Retained earnings 55,000 $ 415,000 12,000 104,000 25,000 $ 281.000 $ 30,400 5,000 50,600 100,000 20,000 75.000 $ 281,000 Statements of Income and Retained Earnings For year ended December 31, Year 9 PAR $420,000 9 e SUB $280,000 Sales 11 Type here to search O EL A U 8:29 PM 2020-04-22 0 . 4. ENG - X a > ACCT 5510 final Spr 203 x + V 0 file:///C:/Users/user/Desktop/ACCT%205510%20final%20Spr%202020%20V2.pdf 4 of 8 lo Other current liabilities - + 20.000 fit to page ID Page view 5.000 A Read aloud 20,000 L Add notes 6 A Preferred shares Retained earnings 75.000 55.000 S415.000 $281.000 Statements of Income and Retained Earnings For year ended December 31, Year 9 PAR Sales $420,000 Other Income 27,000 447,000 Cost of goods sold 316,000 Depreciation expense 21,000 Other expenses 36,000 Income tax expense 26.000 Net income 48,000 Retained earnings, beginning 25,000 Dividends (18,000) Retained earnings, ending $ 55.000 SUB $280,000 30,000 310,000 240,000 10,000 15,000 19,000 26,000 59,000 (10,000) $ 75.000 11 Type here to search O EL 9 e A U 8:29 PM 2020-04-22 0 . 4. ENG a ACCT 5510 final Spr 203 x + V - X > 0 file:///C:/Users/user/Desktop/ACCT%205510%20final%20Spr%202020%20V2.pdf Additional Information 1. Both companies pay tax at the rate of 40%. 2. PAR provided consulting services to the SUB for $4,000 during Year 9. 3. On December 31, Year 8, SUB's inventory included $45,000 of inventory purchased from PAR. Sales to SUB were priced at 20% markup on sales. 4. SUB sold $100,000 of inventory to PAR during Year 9. At December 31, Year 9, 70% of this inventory was sold. PAR had not paid SUB for $9,000 of the sales at December 31, Year 9. SUB charges a 25% gross profit margin on sales to PAR. 5. On July 1, Year 7. PAR purchased a parcel of land from SUB for $6,000. The land originally cost SUB $10,000. In Year 9, PAR sold 40% of this land to an outsider. 6. On April 1, Year 8, SUB sold a building to PAR for $25,000. The building's carrying value was $15,000 on this date. PAR estimated the remaining life of the building was 10 years at the time of the purchase from SUB. 7. On January 1, Year 7, 520,000 of 3% cumulative preferred shares, redeemable at 1.06, were issued by SUB. PAR purchased none of the preferred shares. Dividends were last declared and paid December 31, Year 7. Calculation and allocation of Acquisition differential: Cost of 66% of SUB $105,000 Implied value (105,000/.66) 159,091 Book value of SUB: Common shares $100,000 Retained earnings 30.000 130.000 O EL 9 e 11 Type here to search Q A 0 I 8:30 PM 2020-04-22 40 ENG a ACCT 5510 final Spr 203 x + V - X > 0 file:///C:/Users/user/Desktop/ACCT%205510%20final%20Spr%202020%20V2.pdf declared and paid December 31, Year 1. Calculation and allocation of Acquisition differential: Cost of 66% of SUB $105,000 Implied value (105,000/.66) 159,091 Book value of SUB: Common shares $100,000 Retained earnings 30,000 130.000 Acquisition differential 29,091 Allocated: Capital assets 24,000 Bonds payable (12,000) 12,000 Balance - goodwill $ 17,091 Acquisition differential amortization and goodwill impairment schedule at Capital assets (8) Bonds payable (10) Goodwill Total Balance at Amortization Acquisition Impairment Dec. 31' Yr 5 Yr 6-Yr 8 $ 24,000 $9,000 (12,000) (3,600) 17,091 5,000 $ 29,091 10,400 Amortization/ Remaining Impairment Year 9 Dec. 31 'Yr 9 $ 3,000 $ 12,000 (1,200) (7,200) 2,000 10,091 $ 3,800 $ 14,891 1 Type here to search O - 9 e ^ U 8:30 PM 44 ENG 2020-04-22 0 a ACCT 5510 final Spr 203 x + V - X > 0 file:///C:/Users/user/Desktop/ACCT%205510%20final%20Spr%202020%20V2.pdf ACCT 5510 Final V2 Spr 2020 Required: Round calculations to the nearest dollar a) Prepare the 3rd schedule: Intercompany profit, gains and losses (6 marks) b) Calculate the following amounts on the consolidated income statement for the year ended December 31, Year 9: (26 marks) (3.5) i) Cost of goods sold (12) ii) Consolidated Net income (Note: show the allocation of Consolidated NI to the Parent, NCI for common and NCI for preferred) (4.5) iii) Income tax expense (3.5) iv) Other income (2.5) v) Depreciation expense c) Calculate the following amounts on the consolidated balance sheet at December 31, Year 9: (19 marks) (2.5) i) Capital assets (2.5) ii) Accumulated depreciation (1.5) iii) Land (7) iv) Noncontrolling interest (show common and preferred separately) (1) V) Accounts receivable (1) vi) Bonds payable (3.5) vii) Deferred income tax (must indicate if asset or liability Show all calculations and amounts in brackets for the consolidated statements line items for any marks 11 Type here to search O E 9 e A U 8:30 PM 2020-04-22 0 . 4. ENG