Cost of 90 (900 1,000) of SET 63,000 Implied value of 100 of SET 70,000 Shareholders' equity Total Preferred Ordinary Preferred stock 40,000 42,000 1 (2,000) Ordinary shares 20,000 20,000 Retained earnings 30,000 8,000 2 22,000 90,000 50,000) 40,000 Acquisition differential (all allocated to patents) 30,000 Patent amortization Year 5 (six year life) (5,000) Unamortized patent, December 31, Year 5 25,000 NCI, date of acquisition interest in common shares (10 x 70,000) 7,000 interest in preferred stock (100 x 50,000) 50,000 Total 57,000 (a) Calculation of consolidated profit PET profit 30,000 Less Dividends from SET 3 (2,700) 27,300 SET profit 22,000 Less Patent amortization (5,000) 17,000 Consolidated profit 44,300 Attributable to PETs shareholders 39,000 NCI (4,000 4 10 x 17,000 4,000 4 ) 5,300 44,300 Notes Liquidation value of 40,000 x 1 05 42,000 Dividends in arrears 4,000 shares x $1 year x 2 years 8,000 Dividends on ordinary shares (15,000 4,000 x $1 year x 3 years ) x 90 2,700 Income for preferred 4,000 x $1 year x 1 year 4,000 How do I find the values in notes 3 and 4 On January 1, Year 5, PET Company acquired 900 ordinary shares of SET Company for $63,000 On this date, the shareholders' equity accounts of SET Company were as follows Ordinary shares (1,000 no par value shares issued) $20,000 Preferred shares (4 000 no par value shares issued) (Note 1) 40,000 Retained earnings 30,000 $90,000 Note 1 The preferred shares are $1, cumulative, non participating with a liquidation value of 1 05 They were two years in arrears on January 1, Year 5 The following are the statements of retained earnings for the two companies for Year 5 PET SET $50,000 $30,000 Retained earnings, beginning of year Profit 30,000 22,000 Dividends (25 000) (15,000) Retained earnings, end of year $55,000 $37,000 Additional Information PET uses the cost method to account for its investment in SET Any acquisition differential is allocated to patents with an estimated useful life of six years as at January 1, Year 5 Neither company has any patents recorded on their separate entity records

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Cost of 90% (900 1,000) of SET 63,000 Implied value of 100% of SET 70,000 Shareholders' equity Total Preferred Ordinary Preferred stock 40,000 42,000 1

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Cost of 90% (900 1,000) of SET 63,000

Implied value of 100% of SET 70,000

Shareholders' equity Total Preferred Ordinary

Preferred stock 40,000 42,000¹ (2,000)

Ordinary shares 20,000 20,000

Retained earnings 30,000 8,000² 22,000

90,000 50,000) 40,000

Acquisition differential (all allocated to patents) 30,000

Patent amortization Year 5 (six-year life) (5,000)

Unamortized patent, December 31, Year 5 25,000

NCI, date of acquisition

- interest in common shares (10% x 70,000) 7,000

- interest in preferred stock (100% x 50,000) 50,000

Total 57,000 (a)

Calculation of consolidated profit

PET profit 30,000

Less: Dividends from SET³ (2,700)

27,300

SET profit 22,000

Less: Patent amortization (5,000) 17,000

Consolidated profit 44,300

Attributable to:

PETs shareholders 39,000

NCI (4,000⁴ + 10% x [17,000 4,000⁴]) 5,300

44,300

Notes:

Liquidation value of 40,000 x 1.05 = 42,000
Dividends in arrears: 4,000 shares x $1/year x 2 years = 8,000
Dividends on ordinary shares: (15,000 4,000 x $1/year x 3 years) x 90% = 2,700
Income for preferred: 4,000 x $1/year x 1 year = 4,000

How do I find the values in notes 3 and 4?

On January 1, Year 5, PET Company acquired 900 ordinary shares of SET Company for $63,000. On this date, the shareholders' equity accounts of SET Company were as follows: Ordinary shares (1,000 no par value shares issued) $20,000 Preferred shares (4.000 no par value shares issued) (Note 1) 40,000 Retained earnings 30,000 $90,000 Note 1: The preferred shares are $1, cumulative, non-participating with a liquidation value of 1.05. They were two years in arrears on January 1, Year 5. The following are the statements of retained earnings for the two companies for Year 5: PET SET $50,000 $30,000 Retained earnings, beginning of year Profit 30,000 22,000 Dividends (25.000) (15,000) Retained earnings, end of year $55,000 $37,000 . Additional Information PET uses the cost method to account for its investment in SET. Any acquisition differential is allocated to patents with an estimated useful life of six years as at January 1, Year 5. Neither company has any patents recorded on their separate-entity records