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The following financial statements were prepared on December 31, Year 6. Balance sheet Silver $100,000 420,000 2,690,000 (310,000) Cash Accounts Receivable Inventory Plant and equipment Accumulated depreciation Investment in Silver Co. -at cost Total Liabilities Common Shares Retained earnings Total Pearl $300,000 200,000 2,000,000 3,000,000 (750,000) 2,400,000 $7,150,000 $900,000 2,850,000 3,400,000 $7,150,000 $2,900,000 $300,000 1,600,000 1,000,000 $2,900,000 Income Statement Silver $1,000,000 Sales Interest income Dividend Income Total revenues Cost of sales Miscellaneous expenses Administrative expenses Income tax expense Total expenses Net income Pearl $3,990,000 10,000 150,000 4,150,000 2,500,000 320,000 80,000 250,000 3,150,000 $1,000,000 1,000,000 400,000 70,000 10,000 120,000 600,000 $400,000 Retained Earnings Statement Balance, January 1 Net income Total Dividends Balance, December 31 Pearl $2,900,000 1,000,000 3,900,000 500,000 $3,400,000 Silver $800,000 400,000 1,200,000 200,000 $1,000,000 Additional Information Pearl purchased 80 percent of the outstanding voting shares of Silver for $2,560,000 on July 1, Year 2, at which time Silver's retained earnings were $400,000. The acquisition differential on this date was allocated as follows: 40 percent to undervalued inventory 40 percent to equipment - remaining useful life 8 years Balance to goodwill During year 6, an impairment test conducted as at December 31. On that day, an impairment loss of $15,000 has occurred. Amortization expense is grouped with cost of goods sold and impairment losses are grouped with administrative expenses. Required: 1. Show the calculation of Goodwill: (3) Cost of 80% investment Implied value of 100% Carrying amount of Silver's net assets : Common shares Retained earnings Acquisition differential Allocated: Inventory Equipment Balance - goodwill 2.Calculate the amount of Non-controlling Interest: (1) NCI: 3. Prepare the amortization/impairment schedule for year 6: (3) Amortization/Impairment Schedule: Balance July 1 Dec. 31 Year 2 Year 2 Inventory Equipment Goodwill Total Amortization Dec. 31 Years 3 to 5 Dec. 31 Year 6 Balance Dec. 31 Year 6 4.Show the calculation of consolidated profit and its allocation between shareholders of parent and NCI: (5) Net income Pearl Less: Dividends from Silver Adjusted net income of Pearl Net income Silver Less: Acquisition differential amortization Adjusted income of Silver Consolidated profit Attributed to: Shareholders of Pearl NCI 5.Consolidated Income Statement for year 6: (10) Pearl Company Consolidated Income Statement for the Year Ended December 31, Year 6 Revenues: Sales Interest Income Total revenues Expenses: Cost of sales Miscellaneous expense Admin expense Income tax Total Expenses Net income Attributable to: Pearl's shareholders Non-controlling interest 6. Consolidated Retained Earnings Statement :(8) Pearl Company Consolidated Retained Earnings Statement for the Year Ended December 31, Year 6 Amount Amount Balance of Retained earnings of pearl Balance of Retained earnings of Silver 8 The following financial statements were prepared on December 31, Year 6. Balance sheet Silver $100,000 420,000 2,690,000 (310,000) Cash Accounts Receivable Inventory Plant and equipment Accumulated depreciation Investment in Silver Co. -at cost Total Liabilities Common Shares Retained earnings Total Pearl $300,000 200,000 2,000,000 3,000,000 (750,000) 2,400,000 $7,150,000 $900,000 2,850,000 3,400,000 $7,150,000 $2,900,000 $300,000 1,600,000 1,000,000 $2,900,000 Income Statement Silver $1,000,000 Sales Interest income Dividend Income Total revenues Cost of sales Miscellaneous expenses Administrative expenses Income tax expense Total expenses Net income Pearl $3,990,000 10,000 150,000 4,150,000 2,500,000 320,000 80,000 250,000 3,150,000 $1,000,000 1,000,000 400,000 70,000 10,000 120,000 600,000 $400,000 Retained Earnings Statement Balance, January 1 Net income Total Dividends Balance, December 31 Pearl $2,900,000 1,000,000 3,900,000 500,000 $3,400,000 Silver $800,000 400,000 1,200,000 200,000 $1,000,000 Additional Information Pearl purchased 80 percent of the outstanding voting shares of Silver for $2,560,000 on July 1, Year 2, at which time Silver's retained earnings were $400,000. The acquisition differential on this date was allocated as follows: 40 percent to undervalued inventory 40 percent to equipment - remaining useful life 8 years Balance to goodwill During year 6, an impairment test conducted as at December 31. On that day, an impairment loss of $15,000 has occurred. Amortization expense is grouped with cost of goods sold and impairment losses are grouped with administrative expenses. Required: 1. Show the calculation of Goodwill: (3) Cost of 80% investment Implied value of 100% Carrying amount of Silver's net assets : Common shares Retained earnings Acquisition differential Allocated: Inventory Equipment Balance - goodwill 2.Calculate the amount of Non-controlling Interest: (1) NCI: 3. Prepare the amortization/impairment schedule for year 6: (3) Amortization/Impairment Schedule: Balance July 1 Dec. 31 Year 2 Year 2 Inventory Equipment Goodwill Total Amortization Dec. 31 Years 3 to 5 Dec. 31 Year 6 Balance Dec. 31 Year 6 4.Show the calculation of consolidated profit and its allocation between shareholders of parent and NCI: (5) Net income Pearl Less: Dividends from Silver Adjusted net income of Pearl Net income Silver Less: Acquisition differential amortization Adjusted income of Silver Consolidated profit Attributed to: Shareholders of Pearl NCI 5.Consolidated Income Statement for year 6: (10) Pearl Company Consolidated Income Statement for the Year Ended December 31, Year 6 Revenues: Sales Interest Income Total revenues Expenses: Cost of sales Miscellaneous expense Admin expense Income tax Total Expenses Net income Attributable to: Pearl's shareholders Non-controlling interest 6. Consolidated Retained Earnings Statement :(8) Pearl Company Consolidated Retained Earnings Statement for the Year Ended December 31, Year 6 Amount Amount Balance of Retained earnings of pearl Balance of Retained earnings of Silver 8