Question
Need the answer asap Thank you On January 1 st .2016, Corporation acquired 80% of the common shares of the Y Company for $1,560,000. At
Need the answer asap
Thank you
On January 1st.2016, Corporation acquired 80% of the common shares of the Y Company for $1,560,000. At that date, Ys assets and liabilities for the following book and fair values:
Y Company
January 1st. 2016
Book Value..Fair Value
Cash$ 120,000.$ 120,000
Accounts receivable.. 330,000.. 325,000
Inventory.. 450,000. 420,000
Equipment.2,000,000. 2,200,000
TOTAL ASSETS$2,900,000..$3,065,000
Accounts payable. 365,000.400,000
Bonds Payable 600,000. 650,000
Common Stock. 1,100,000
Retained Earnings.. .835,000
TOTAL LIABILITIES& OWNERS EQUITY..2,900,000
As of January 1,2016, the equipment had a remaining useful life of 8 years. Inventory on hand on January 1, 2016, was all sold by December 31st, 2016. The bonds payable had a remaining useful life of 4 years and the accounts receivable and payable were settled in March of 2016.
X uses the cost method to account for its investment in Y. The companies balance sheets at December 31st. 2020, and the income statements for the year 2020 are given below:-
X CORPORATION AND Y CORPORATION
Balance Sheets
December 31st. 2020
X..Y
Cash$ 545,000.$ 210,000
Accounts receivable 825,000.. 540,000
Inventory1,140 000. 600,000
Equipment, net2,055,000 2,250,000
Investment in Y..1,560,000..0..
TOTAL ASSETS$6,125,000$3,600,000
Accounts payable 825,000.. 300,000
Bonds payable 1,050,000 600,000
Common shares 1,900,000.. 780,000
Retained Earnings.. 2,350,000...1,920,000
TOTAL LIABILITIES& OWNERS EQUITY. $ 6,125,000..$3,600,000
X CORPORATION AND Y CORPORATION
Income Statements
Year ended December 31,2020
X..Y
Sales..$7,500,000$4,500,000
Cost of Goods sold.5,250,000. 3,600,000
Gross Profit.2,250,000. 900,000
Selling and administrative expenses. 900,000 525,000
Amortization expense. 180,000 82,500
Interest expense. 90,000. 37,500
Income before income tax expenses. $1,080,000 $255,000
Income taxes 372,000 90,000
NET INCOME $ 708,000..$ 165,000
Additional Information:-
- During 2019 and 2020 Y sold inventory to Y with a 20% gross profit as follows:-
2020.2019
Intercompany sales-Y to X$ 525,000$ 450,000
Ys goods remaining in Xs inventory at December 31 150,000.. 120,000
- During 2019 and 2020 X sold inventory to Y at a 25% mark up on cost as follow:-
20202019
Intercompany sales X to Y..300,000350,000
Xs goods remaining in Ys inventory100,000150,000
- On July 1st. 2018, X sold Y equipment with a net book value of $60,000 for cash consideration of $165,000. The equipment originally cost X $135,000. It had a useful remaining life of four years at the date of the intercompany sale.
- On July 1st 2018 , X sold Y a piece of land for $200,000. The land had originally cost X $150,000. Y still has the land which was paved as a parking lot for employees car.
- X paid dividends of $100,000 in the year and Y paid $80,000.
- Both companies use a 40% tax rate.
Required:-
- Prepare the consolidated net income for 2020
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