Explain the answers and the methodology of getting the answers that have red flags from below. Only for questions from b-d.
Requirement a. Calculate consolidated retained earnings at January 1, 2026. In this step, calculate the acquisition differential. (Round your answers to the nearest whole dollar.) Now, calculate the effects of the upstream intercompany sales transactions. low, calculate the effects of the downstream intercompany sales transactions. (Round your answers to the nearest whole dollar.) values.) CTL's retained earnings, January 1,2026 Less the unrealized opening inventory profits CTL's adjusted retained earnings, January 1, 2026 MMI's retained earnings, January 1,2026 MMI's retained earnings at acquisition Change in MMl's retained earnings since acquisition Adjust for: Fair value amortizations to January 1,2026 Unrealized equipment loss, after tax, at January 1, 2026 MMI's adjusted change in retained earnings to January 1, 2026913,265 MMO's adjusted change in retained earnings to January 1, 2026 belonging to CTL Consolidated retained earnings at January 1, 2026 \begin{tabular}{rr} (335,315) & \\ \hline 67,680 \\ \hline 913,265 & \\ \hline & 593,622 \\ \hline$8,106,132 \\ \hline \end{tabular} Requirement b. Using the direct method, prepare a consolidated SFP, SI, and SCE (partial) for the year-ending December 31,2026. Start by calculating Mastic's adjusted net income. (Round your answers to the nearest whole dollar.) Consolidated Statement of Changes in Equity (partial) As at December 31,2026 Opening retained earnings Net income Dividends declared \begin{tabular}{rr} $ & 8,106,132 \\ 694,265 \\ & (154,000) \\ \hline$ & 8,646,397 \\ \hline \hline \end{tabular} Next, calculate the NCI at December 31, 2026. Non-controlling interest at January 1, 2026 Consolidated net income attributable to non-controlling interest Less: Dividends atributable to Mastic $1,714,258115,712(33,250)$1,796,720 In this step, complete the consolidated statement of financial positions using the direct method. (Round your answers to the nearest whole dollar.) Requirement c. Prepare a direct calculation of consolidated retained earnings at December 31,2026 . (Round your answers to the nearest whole dollar.) CTL's retained earnings, December 31, 2026 Paper size Letter Print Less unrealized inventory profits, downstream CTL's adjusted retained earnings, December 31, 2026 MMI's retained earnings, December 31, 2026 MMI's retained earnings at acquisition Change in MMI's retained earnings since acquisition Adjust for Fair value differential amortizations to December 31, 2026 After-tax unrealized gain from equipment sale Less unrealized land profit MMI's adjusted change in retained earnings to December 31, 2026 Consolidated retained earnings at December 31,2026 Requirement d. Prepare a direct calculation of consolidated net income for the year-ending December 31,2026 . (Round your answers to the nearest whole dollar.) CTL's separate-entity net income for the year ending December 31, 2026 Less: dividends declared by MMI Add opening inventory profit, after tax Less closing inventory profit, after tax CTL's adjusted net income (loss) MMI's net income (loss) for the year ending December 31, 2026 Fair-value amortizations for 2026 Current-year equipment loss after tax Fair value differential amortizations for 2026 2: Additional Acquisition Information 1. Accounts receivable were collected by the end of 2023 . 2. Inventory turns over every 45 days. 3. On January 1,2023 , the equipment had a remaining useful life of 10 years, and the building had a remaining useful life of 15 years. 3: Statements of Financial Position Presented is the separate-entity SFP for both companies as at December 31, 2026. 1. In 2025 , it was determined that the goodwill was valued at $680,000. There have been no other impairments. 2. In 2026, CTL paid rent of $51,600 to MMI for the use of a warehouse. CTL still owed MMI $4,300 for the last month's management fee. 3. In 2025, CTL sold $675,000 of inventory to MMI, earning $236,250 in profit. At the end of 2025 , MMI still held 20% of the inventory. In 2026 , CTL sold $740,000 of inventory to Mastic, earning $259,000 in profit. MMI still held 35% of the inventory at the end of 2026. 4. On January 1, 2024, MMI sold equipment to CTL for a loss of $94,000. It was determined that the loss was not considered to be a permanent impairment. At the time of the sale, the useful life of the equipment was 20 years. 5. On July 15, 2026, MMI sold land to CTL for a profit of $160,000. CTL still holds the land at the end of 2026. 6. MMI declared dividends on December 31, 2026. The dividends will be paid on February 15, 2027. 7. Both companies pay tax at a rate of 20%. 5: Statements of Income Presented is the separate-entity SI, along with changes in retained earnings for both companies for the year-ending December 31 , 2026. Requirement a. Calculate consolidated retained earnings at January 1, 2026. In this step, calculate the acquisition differential. (Round your answers to the nearest whole dollar.) Now, calculate the effects of the upstream intercompany sales transactions. low, calculate the effects of the downstream intercompany sales transactions. (Round your answers to the nearest whole dollar.) values.) CTL's retained earnings, January 1,2026 Less the unrealized opening inventory profits CTL's adjusted retained earnings, January 1, 2026 MMI's retained earnings, January 1,2026 MMI's retained earnings at acquisition Change in MMl's retained earnings since acquisition Adjust for: Fair value amortizations to January 1,2026 Unrealized equipment loss, after tax, at January 1, 2026 MMI's adjusted change in retained earnings to January 1, 2026913,265 MMO's adjusted change in retained earnings to January 1, 2026 belonging to CTL Consolidated retained earnings at January 1, 2026 \begin{tabular}{rr} (335,315) & \\ \hline 67,680 \\ \hline 913,265 & \\ \hline & 593,622 \\ \hline$8,106,132 \\ \hline \end{tabular} Requirement b. Using the direct method, prepare a consolidated SFP, SI, and SCE (partial) for the year-ending December 31,2026. Start by calculating Mastic's adjusted net income. (Round your answers to the nearest whole dollar.) Consolidated Statement of Changes in Equity (partial) As at December 31,2026 Opening retained earnings Net income Dividends declared \begin{tabular}{rr} $ & 8,106,132 \\ 694,265 \\ & (154,000) \\ \hline$ & 8,646,397 \\ \hline \hline \end{tabular} Next, calculate the NCI at December 31, 2026. Non-controlling interest at January 1, 2026 Consolidated net income attributable to non-controlling interest Less: Dividends atributable to Mastic $1,714,258115,712(33,250)$1,796,720 In this step, complete the consolidated statement of financial positions using the direct method. (Round your answers to the nearest whole dollar.) Requirement c. Prepare a direct calculation of consolidated retained earnings at December 31,2026 . (Round your answers to the nearest whole dollar.) CTL's retained earnings, December 31, 2026 Paper size Letter Print Less unrealized inventory profits, downstream CTL's adjusted retained earnings, December 31, 2026 MMI's retained earnings, December 31, 2026 MMI's retained earnings at acquisition Change in MMI's retained earnings since acquisition Adjust for Fair value differential amortizations to December 31, 2026 After-tax unrealized gain from equipment sale Less unrealized land profit MMI's adjusted change in retained earnings to December 31, 2026 Consolidated retained earnings at December 31,2026 Requirement d. Prepare a direct calculation of consolidated net income for the year-ending December 31,2026 . (Round your answers to the nearest whole dollar.) CTL's separate-entity net income for the year ending December 31, 2026 Less: dividends declared by MMI Add opening inventory profit, after tax Less closing inventory profit, after tax CTL's adjusted net income (loss) MMI's net income (loss) for the year ending December 31, 2026 Fair-value amortizations for 2026 Current-year equipment loss after tax Fair value differential amortizations for 2026 2: Additional Acquisition Information 1. Accounts receivable were collected by the end of 2023 . 2. Inventory turns over every 45 days. 3. On January 1,2023 , the equipment had a remaining useful life of 10 years, and the building had a remaining useful life of 15 years. 3: Statements of Financial Position Presented is the separate-entity SFP for both companies as at December 31, 2026. 1. In 2025 , it was determined that the goodwill was valued at $680,000. There have been no other impairments. 2. In 2026, CTL paid rent of $51,600 to MMI for the use of a warehouse. CTL still owed MMI $4,300 for the last month's management fee. 3. In 2025, CTL sold $675,000 of inventory to MMI, earning $236,250 in profit. At the end of 2025 , MMI still held 20% of the inventory. In 2026 , CTL sold $740,000 of inventory to Mastic, earning $259,000 in profit. MMI still held 35% of the inventory at the end of 2026. 4. On January 1, 2024, MMI sold equipment to CTL for a loss of $94,000. It was determined that the loss was not considered to be a permanent impairment. At the time of the sale, the useful life of the equipment was 20 years. 5. On July 15, 2026, MMI sold land to CTL for a profit of $160,000. CTL still holds the land at the end of 2026. 6. MMI declared dividends on December 31, 2026. The dividends will be paid on February 15, 2027. 7. Both companies pay tax at a rate of 20%. 5: Statements of Income Presented is the separate-entity SI, along with changes in retained earnings for both companies for the year-ending December 31 , 2026
