MAMI SA CASE:

Mami SA contributes $170,000 cash and Nasrin Company brings in net assets valued at $170,000 to form Mazda Inc.Mami, SA and Nasrin Company each receive 50 percent equity interest in Mazda Inc.The financial statements of Mazda Inc. for its first year of operations are as follows:

Mazda Inc.

Income Statement

YEAR 1

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Revenues$80,000

Expenses50,000

________

Income before tax30,000

Tax Expense10,000

________

Net Income$20,000

________

Mazda Inc.

Balance Sheet

December 31, Year 1

______________________________________________________________________________

Cash$40,000Liabilities $60,000

Inventory60,000

Property, Plant, andCommon Stock 340,000

Equipment (net)320,000Retained Earnings20,000

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Total Assets$420,000$420,000

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Mami SA's financial statements for the year ended December 31, Year 1 and before making any accounting entries related to its investment in Mazda, Inc., are as follows:

Mami SA

Income Statement for Year 1

______________________________________________________________________________

Revenues$800,000

Expenses450,000

________

Income before tax 350,000

Tax Expense 100,000

________

Net Income$250,000

________

Mami SA

Balance Sheet for the year ended on December 31, Year 1

______________________________________________________________________________

Cash$130,000Liabilities $250,000

Inventory200,000

Property, Plant, andCommon Stock600,000

Equipment (net)650,000Retained Earnings300,000

Investment in

Mazda Inc. (at cost)170,000

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Total Assets$1,150,000$1,150,000

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Restate Mami, SA's Year 1 financial statements to properly account for its investment in Mazda Inc. under the proportionate consolidation method and equity method.