Based on the information provided, prepare a memorandum for the partner of the accounting firm that you work for. The following should be included in the memorandum:

1. A detailed explanation of the important financial accounting issues of Fantastic Corporation (Fantastic), and North Limited (North), its subsidiary and Kale Ltd. (Kale), its associate.
2. Recalculated account balances for the consolidated financial statements to the extent that information is available including supporting calculations for:

• The acquisition differential (AD) calculation and AD amortization for the investment in North.
• The investment account balance for the investment in Kale.
• The non-controlling interest for the consolidated balance sheet.
• The calculation of consolidated net income ATP.
• The calculation of consolidated net income attributable to NCI.

INFORMATION:

In early September 2020, your firms audit client, Fantastic acquired in separate transactions an 80% interest in North and a 40% interest in Kale. All three companies are federally incorporated Canadian companies and have August 31^st year ends. They all manufacture small appliances, but they do not compete with each other.

You are the senior on the audit of Fantastic. The partner has just received the preliminary consolidated financial statements from the controller of Fantastic along with unconsolidated statements for the three separate companies. Extracts from these statements are summarized in the attached Excel spreadsheet. Additional information obtained from Fantastic is provided below:

Additional Information:

1. Fantastic acquired the 80% interest in North for $4,000,000 paid as follows:

• $2,000,000 in cash, and
• 160,000 common shares of Fantastic recorded in the books of Fantastic at $2,000,000.

2. Fantastic acquired the 40% interest in Kale at a cost of $2,100,000, paid as follows:

• $100,000 in cash, and
• 160,000 common shares of Fantastic recorded in the books of Fantastic at $2,000,000.

3. During the course of the audit, the following information was obtained:
4. The carrying amount of 80% of Norths net assets at the date of acquisition was $2,280,000. The acquisition differential consisted of the following:

The excess of fair value of land over carrying amount	$ 800,000
The excess of fair value of plant and equipment over carrying amount	700,000
20% non-controlling interests share of excess of fair value over carrying amount	(300,000)
Goodwill of North written off	(48,000)
Deferred research and development expenditures written off	(72,000)
Unallocated excess	640,000
	$ 1,720,000

The plant and equipment had a remaining useful life of ten years when Fantastic acquired North.

2. The price paid by Fantastic for its investment in Kale was 10% lower than the 40% of the fair value of Kales identifiable net assets.
3. During August 2021, Kale sold goods to Fantastic as follows:

Cost to Kale	$1,000,000
Normal selling price	1,250,000
Price paid by Fantastic	1,200,000

Fantastic had not sold these goods as of August 31, 2021

4. North also sold goods to Fantastic in August 2021 and Fantastic had not sold them by August 31, 2021.

Cost to North	$630,000
Normal selling price	750,000
Price paid by Fantastic	850,000

5. For the year ended August 31, 2021, Fantastics sales were $8,423,300 and Norths sales were $6,144,500
6. The companies pay income tax at the rate of 40%.

Extracts from Financial Statements
At August 31, 2021
	Unconsolidated			Consolidated
	Fantastic	North	Kale	Fantastic
Investment in North Ltd., at cost	$ 4,000,000
Investment in Kale Ltd., at cost	2,100,000			$ 2,100,000
Deferred development costs		$ 90,000
Goodwill		60,000
Non-controlling interest				590,000
Common shares	6,000,000	1,000,000	$ 2,000,000	6,000,000
Retained earnings, beginning	618,000	1,850,000	1,760,000	618,000
Profit	600,000	300,000	100,000	660,000
Dividends	- 400,000	- 200,000	- 150,000	- 400,000
Retained earnings, end of year	$ 818,000	$ 1,950,000	$ 1,710,000	$ 878,000