On December 31, Year 2, P Inc. purchased 80% of the outstanding ordinary shares of S Company for $310,000. At that date, S had ordinary shares of $200,000 and retained earnings of $60,000. In negotiating the purchase price, it was agreed that the assets on Ss statement of financial position were fairly valued except for plant assets, which had a $40,000 excess of fair value over carrying amount. It was also agreed that S had unrecognized intangible assets consisting of trademarks that had an estimated value of $24,000. The plant assets had a remaining useful life of eight years at the acquisition date and the trademarks would be amortized over a 12-year period. Any goodwill arising from this business combination would be tested periodically for impairment. P accounts for its investment using the cost method.

Additional Information -

- At December 31, Year 6, an impairment test of Ss goodwill revealed its recoverable amount is $50,000

- An impairment test indicated that the trademarks had a recoverable amount of $13,750. The impairment loss on these assets (goodwill and trademarks) occurred entirely in Year 6.

- On December 26, Year 6, P declared dividends of $36,000, while S declared dividends of $20,000

- On December 26, Year 6, P declared dividends of $36,000, while S declared dividends of $20,000.

Financial statements for P and S for the year ended December 31, Year 6, were as follows:
STATEMENTS OF FINANCIAL POSITION
December 31, Year 6
	P											S
Assets
Plant assetsnet	$									230,000		$	160,000
Investment in Storm										310,000
Other investments										82,000			22,000
Notes receivable													10,000
Inventory										100,000			180,000
Accounts receivable										88,000			160,000
Cash										20,000			30,000
										830,000			562,000

Required: -

1. Calculate the acquisition differential, goodwill and non-controlling interest at acquisition date, December 31, Year 2. Prepare the acquisition eliminating entry at acquisition date on the consolidation worksheet.
2. Prepare the schedule of amortization of acquisition differential and impairment)
3. Calculate consolidated net income for the year ended December 31, Year 6. Separate the portion attributable to P and to non-controlling interest.
4. Prepare the consolidated income statement for year 6. Show attribution to each shareholder group.
5. Calculate the ending balance of consolidated retained earnings at December 31, Year 6.
6. Calculate the ending balance of non-controlling interest that would appear on the consolidated balance sheet at December 31, Year 6
7. Calculate the balance of Plant Assets @ net that would show on the consolidated balance sheet at December 31, Year 6.
8. Calculate the balance of ordinary (common) shares on the consolidated balance sheet at December 31, Year 6.
9. Assume that P used the equity method to record its investment in S. What would be the value of the Investment in S account on the Ps separate entity balance sheet at December 31, Year 6.

$ $ 500,000 $ 200,000 110,000 150,000 Shareholders' Equity and Liabilities Ordinary shares Retained earnings Notes payable Other current liabilities Accounts payable 130,000 100,000 10,000 50,000 80,000 62,000 $ 830,000 $ 562,000 INCOME STATEMENTS For the year ended December 31, Year 6 Sales $ 870,000 $ Cost of goods sold (638,000) S 515,000 (360,000) $ $ Gross profit Selling expenses Other expenses Interest and dividend income 232,000 (22,000) (148,000) 155,000 (35,000) (72,000) 34,000 2,000 Profit $ $ 96,000 $ 50,000 $ $ 500,000 $ 200,000 110,000 150,000 Shareholders' Equity and Liabilities Ordinary shares Retained earnings Notes payable Other current liabilities Accounts payable 130,000 100,000 10,000 50,000 80,000 62,000 $ 830,000 $ 562,000 INCOME STATEMENTS For the year ended December 31, Year 6 Sales $ 870,000 $ Cost of goods sold (638,000) S 515,000 (360,000) $ $ Gross profit Selling expenses Other expenses Interest and dividend income 232,000 (22,000) (148,000) 155,000 (35,000) (72,000) 34,000 2,000 Profit $ $ 96,000 $ 50,000