On December 31, Year 2, Palm Inc purchased 80 of the outstanding ordinary shares of Storm Company for $350,000 At that date, Storm had ordinary shares of $240,000 and retained earnings of $64,000 In negotiating the purchase price, it was agreed that the assets on Storms statement of financial position were fairly valued except for plant assets, which had a $44,000 excess of fair value over carrying amount It was also agreed that Storm had unrecognized intangible assets consisting of trademarks that had an estimated value of $36,000 The plan 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 for this business combination would be tested periodically for impairment Palm accounts for its investment using the cost method and values the noncontrolling interest in its subsidiary at its fair value at acquisition, proportionate to the amount paid for its controlling interest Financial statements for Palm and Storm for the year ended December 31, Year 6, were as follows Additional information At December 31, Year 6, an impairment test of Storms goodwill revealed the following Fair value less disposal costs based on recent offer from prospective purchaser $50 000 Value in use based on undiscounted future net cash flows 69,000 Value in use based on discounted future net cash flows using a discount rate of 8 , which is Storms incremental borrowing rate 42,000 2 , which is the risk free rate on government bonds 47,000 An impairment test indicated that the trademarks had a recoverable amount of $14,350 The impairment loss on these assets occurred entirely in Year 6 On December 26, Year 6, Palm declared dividends of $40,000, while Storm declared dividends of $24,000 Amortization expense is included in selling expenses, while impairment losses on the trademarks are reported in other expenses Required use $50,000 as the ending value of goodwill on the consolidated balance sheet for year 6 (the fair value less disposal costs based on recent offer from a prospective purchaser) assume dividends declared are also paid) A) Prepare consolidated financial statements

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On December 31, Year 2, Palm Inc. purchased 80% of the outstanding ordinary shares of Storm Company for $350,000. At that date, Storm had ordinary

On December 31, Year 2, Palm Inc. purchased 80% of the outstanding ordinary shares of Storm Company for $350,000. At that date, Storm had ordinary shares of $240,000 and retained earnings of $64,000. In negotiating the purchase price, it was agreed that the assets on Storms statement of financial position were fairly valued except for plant assets, which had a $44,000 excess of fair value over carrying amount. It was also agreed that Storm had unrecognized intangible assets consisting of trademarks that had an estimated value of $36,000. The plan 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 for this business combination would be tested periodically for impairment. Palm accounts for its investment using the cost method and values the noncontrolling interest in its subsidiary at its fair value at acquisition, proportionate to the amount paid for its controlling interest.

Financial statements for Palm and Storm for the year ended December 31, Year 6, were as follows:

Additional information

At December 31, Year 6, an impairment test of Storms goodwill revealed the following:

Fair value less disposal costs based on recent offer from prospective purchaser $50.000

Value in use based on undiscounted future net cash flows 69,000

Value in use based on discounted future net cash flows using a discount rate of:

8%, which is Storms incremental borrowing rate 42,000

2%, which is the risk-free rate on government bonds 47,000

An impairment test indicated that the trademarks had a recoverable amount of $14,350. The impairment loss on these assets occurred entirely in Year 6.
On December 26, Year 6, Palm declared dividends of $40,000, while Storm declared dividends of $24,000.
Amortization expense is included in selling expenses, while impairment losses on the trademarks are reported in other expenses.

Required:

use $50,000 as the ending value of goodwill on the consolidated balance sheet for year 6 (the fair value less disposal costs based on recent offer from a prospective purchaser); assume dividends declared are also paid)

A) Prepare consolidated financial statements