FE20 (18 Marks)

ILT Corp. owns 75% of the common shares of CAG Inc. ILT uses the cost method to account for its investment in CAG. The companies' financial statements for the year ended December 31, 2020, follow:

Statements of financial position

As at December 31, 2020

Assets ILT CAG

Cash $145,000 $40,000

Accounts receivable and accruals 450,000 360,000

Inventory 625,000 380,000

Loan receivable 315,000 0

Property, plant and equipment net 1,975,000 480,000

Investment in CAG 160,000 0

$3,670,000 $1,260,000

Liabilities and shareholders' equity

Accounts payable and accruals $325,000 $180,000

Long-term debt 1,050,000 750,000

Common shares 250,000 100,000

Retained earnings 2,045,000 230,000

$3,670,000 $1,260,000

Statements of comprehensive income

Year ended December 31, 2020

ILT CAG

Sales and other income $4,250,000 $2,450,000

Cost of sales 2,635,000 1,755,000

Gross margin 1,615,000 695,000

Depreciation expense 225,000 125,000

Other expenses 460,000 235,000

Income tax expense 300,000 180,000

Net income $630,000 $155,000

Additional information:

1. At the time of acquisition, the fair values of CAG's identifiable assets equaled book values and there was no goodwill associated with the acquisition.

2. CAG sold $180,000 of inventory to ILT during the year on 30-day trade terms. At year end CAG's account receivable from ILT was $25,000. ILT resold the inventory to a third party in 2020.

3. CAG borrowed $129,000 from ILT in March 2020, payable in full on July 31, 2024. Interest charges for the year totalled $10,000 of which $8,000 remained payable at year end.

4. ILT charges CAG $12,000 for the year in management fees. At December 31, 2020, the management fees for December remained unpaid.

Required:

a) Prepare consolidated statement of comprehensive income for the year ended December 31, 2020.

b) Calculate the following consolidated statement of financial position account balances as at December 31, 2020:

i. Accounts receivable and accruals

ii. Loan receivable

iii. Accounts payable and accruals

iv. Long-term debt