Chapter $5$ Problem: Part $1($includes chapter $4$ concepts$)$

On December $31,2012,$ P Inc. purchased $80\backslash \%$ of the outstanding ordinary shares of S Company for $\backslash (\backslash$$ $310,000\backslash ).$ At that date, $\backslash ($ S $\backslash )$ had ordinary shares of $\backslash (\backslash$$ $200,000\backslash )$ and retained earnings of $\backslash (\backslash$$ $60,000\backslash ).$ In negotiating the purchase price, it was agreed that the assets on S$\text{'}$s statement of financial position were fairly valued except for plant assets, which had a $\backslash$$$40,000$ excess of fair value over carrying amount. It was also agreed that $\backslash ($ S $\backslash )$ had unrecognized intangible assets consisting of trademarks that had an estimated value of $\backslash (\backslash$$ $24,000\backslash ).$ The plant assets had a remaining useful life of eight years at the acquisition date and the trademarks would be amortized over a $12-$year period. Any goodwill arising from this business combination would be tested periodically for impairment. P accounts for its investment using the cost method and uses the fair value enterprise $($entity$)$ theory to prepare consolidated statements.

Additional Information:

$-$ At December $31,2016,$ an impairment test of S$\text{'}$s goodwill revealed its recoverable amount is $\backslash (\{\}^\{\backslash$text $\{$D $\}\}\backslash )\backslash (\backslash$$ $50,000\backslash )$

$-$ An impairment test indicated that the trademarks had a recoverable amount of $\backslash (\backslash$$ $13,750\backslash ).$ The impairment loss on these assets $($goodwill and trademarks$)$ occurred entirely in $2016.$

$-$ On December $26,2016,$ P declared dividends of $\backslash (\backslash$$ $36,000\backslash ),$ while $\backslash ($ S $\backslash )$ declared dividends of $\backslash (\backslash$$ $15,000\backslash ).$

$-$ Amortization expense is reported in selling expenses, while impairment losses are reported in other expenses.

Financial statements for $\backslash ($ P $\backslash )$ and $\backslash ($ S $\backslash )$ for the year ended December $31,2016,$ were as follows:

Required: Use proper three$-$line titles for all statements.

a$)$ Calculate the acquisition differential, goodwill and non$-$controlling interest at acquisition date, December $31,2012.(4$ marks$)$

b$)$ Prepare the acquisition eliminating entry at acquisition date on the consolidation worksheet. $(3$ marks$)$

c$)$ What would be the value of NCI and goodwill at acquisition date if $\backslash ($ P $\backslash )$ had used the identifiable net asset theory to prepare consolidated statements. $(3$ mark$)$

d$)$ Prepare the schedule of amortization of acquisition differential and impairment. $(4$ marks$)$

e$)$ Calculate consolidated net income for the year ended December $31,2016.$ Separate the portion attributable to $\backslash ($ P $\backslash )$ and to non$-$controlling interest. $(5$ marks$)$

f$)$ Prepare the consolidated income statement for $2016.$ Show attribution to each shareholder group. $(6$ marks$)$