need help with my assignment, its an amortization and impairment schedule, consolidated income statement, retained earnings, nci, consolidated balance sheet

Take Home Quiz Chapter 5 & 6 ACCT3065 Name: Due: Friday, October 14, 2016 in class. May work with one partner and submit one paper. Note this will be handed out in class Friday, October 7 th, 2016. Part A. On January 1, Year 4, PARENT Corporation purchased 60% of the outstanding shares of SUBSIDIARY Company for $480,000. At that date, the book values and fair values of SUBSIDIARY were as follows: Cash Accounts receivable Inventory Equipment (net) Accounts payable Long-term debt Common shares Retained earnings SUBSIDIARY COMPANY Balance Sheet January 1, Year 4 Book Value $ 100,000 180,000 220,000 500,000 $ 1,000,000 $ 240,000 120,000 200,000 440,000 $ 1,000,000 Fair Value $ 100,000 180,000 260,000 430,000 $ 240,000 120,000 The Year 8 financial statements of PARENT and SUBSIDIARY are as follows: PARENT CORPORATION and SUBSIDIARY COMPANY Balance Sheets December 31, Year 8 PARENT SUBSIDIARY Cash $ 500,000 $ 140,000 Accounts receivable 780,000 200,000 Due from SUBSIDIARY 105,000 Inventory 970,000 300,000 Investment in SUBSIDIARY 480,000 Equipment net 1,405,000 600,000 $ 4,240,000 $ 1,240,000 Accounts payable $ 720,000 $ 150,000 Due to PARENT 105,000 Long-term liabilities 700,000 205,000 Common shares 2,000,000 200,000 Retained earnings 820,000 580,000 $ 4,240,000 $ 1,240,000 Page | 1 Take Home Quiz Chapter 5 & 6 ACCT3065 Name: PARENT CORPORATION and SUBSIDIARY COMPANY Statements of Income and Retained Earnings Year ended December 31, Year 8 PARENT SUBSIDIARY Sales $ 1,900,000 $ 1,000,000 Dividend income 60,000 Interest revenue 10,000 1,970,000 1,000,000 Cost of goods sold 1,200,000 700,000 Gross profit 770,000 300,000 Expenses Selling and administrative 200,000 50,000 Amortization 80,000 40,000 Interest and other 90,000 30,000 370,000 120,000 Income before income taxes 400,000 180,000 Income tax expense 160,000 72,000 Net income 240,000 108,000 Retained earnings, January 1, Year 8 700,000 572,000 Dividends (120,000) (100,000) Retained earnings, December 31, Year 8 $ 820,000 $ 580,000 Additional information 1. As of January 1, Year 4, the capital assets of SUBSIDIARY had a remaining useful life of 10 years, and SUBSIDIARY planned to keep the capital assets throughout their useful life. 2. Each year, goodwill is evaluated to determine if there has been a permanent impairment. Goodwill impairment was $80,000 in Year 5 and $50,000 in Year 8. 3. On July 1, Year 8, PARENT lent $105,000 to SUBSIDIARY. The loan bears a zero interest rate and principal due June 30, Year 9. 4. On December 15, Year 8, SUBSIDIARY declared and paid $100,000 in dividends. Required: (35 Marks) a) Indicate the method of accounting PARENT is using to record its investment in SUBSIDIARY on its non-consolidated financial statements. Identify 2 factors that support your conclusion. b) Calculate the goodwill on purchase c) Prepare the acquisition differential amortization and impairment schedule. d) Prepare the consolidated income statement. e) Calculate consolidated retained earnings as of January 1, Year 8. f) Prepare the consolidated retained earnings as of December 31, Year 8. g) Calculate the non-controlling interest as of December 31, Year 8. h) Prepare the consolidated Balance Sheet for PARENT on December 31, Year 8. Page | 2 Take Home Quiz Chapter 5 & 6 ACCT3065 Name: Part B. X Inc. owns 80% of Y Inc. During Year 2, X Inc. sold inventory to Y for $10,000. Half of this inventory remained in Y's warehouse at year end. Y Inc. sold Inventory to X Inc. for $5,000. 40% of this inventory remained in X's warehouse at year end. Both companies are subject to a tax rate of 40%. The gross profit percentage on sales is 20% for both companies. Unless otherwise stated, assume X Inc. uses the cost method to account for its Investment in Y Inc. 1. What is the after-tax dollar value of X's unrealized profits during the year on its sales to Y? 2. What is the after-tax dollar value of X's realized profits during the year on its sales to Y? 3. What is the after-tax dollar value of Y's unrealized profits during the year on its sales to X? 4. What is the after-tax dollar value of Y's realized profits during the year on its sales to X? 5. What effect (if any) would Y's unrealized profits on its sales to X have on the non-controlling interest account on the consolidated balance sheet? 6. What would be the journal entry to eliminate any unrealized profits from the Consolidated Financial Statements during the year? 7. Assume that Y Inc. reported an after-tax net income of $20,000 in Year 2, what would be Y's adjusted net income for the year? Page | 3