On January 1, 2015, Patricia Inc. (PI) purchased 75% of the outstanding common shares of Sunday Limited (SL) for $2,880. On that date, SL had 200 common shares outstanding, which had a book value of $10 per share. The fair market value was $16 per share, but PI paid a premium in order to induce the shareholders of SL to sell their shares. At the date of acquisition, the recorded assets and liabilities of SL were fairly valued except for current portion of long-term debt which had a fair value that exceeded book value by $80. In addition, SL registered and owned an unrecorded internally developed patent, which was estimated to have a fair value of $240 on the acquisition date. SLs right to the patent expires in 10 years from the date of acquisition, and the registration cannot be renewed. SLs Retained Earnings at the date of acquisition was $600. PI uses Fair Value Enterprise Method. Ignore deferred income taxes when amortizing acquisition differential.

The separate entity financial statements of Patricia Inc. (PI) and Sunday Ltd (SL) for the year ended December 31, 2020 are presented in Exhibit A below.

Additional Information

1) Goodwill was tested on an annual basis for impairment and impairment losses of $250 and

$200 were reported in 2018 and 2020, respectively. Of these impairment losses, the amounts attributable to PI's investment were $230 in 2018 and $170 in 2020.

2) On December 31, 2020, SL's inventories contained $180 of goods purchased from PI. During 2020, sales from PI to SL were $220, and at December 31, 2020, SL still owed $60 to PI. PI's

gross margin on sales to SL is 25%.

3) On January 1, 2018, SL sold equipment to PI for $96. The equipment originally cost SL $90 on January 1, 2016. SL uses straight line depreciation and had estimated 10 years useful life for the equipment with no residual value. There was no change expected to the useful life. PI also uses straight line depreciation.

4) Dividends declared and paid in the year by PI and SL were $60 and $40 respectively. No additional shares were issued by SL after the date of acquisition.

5) Both companies pay income tax at the rate of 40%. Ignore deferred income taxes when allocating and amortizing the acquisition differential.

Exhibit A Statement of Financial Position As at December 31, 2020 PI SL S $ Assets Cash Account receivable Inventory 290 860 980 2,130 150 610 720 1,480 Property, Plant, Equipment & Intangible Assets Other investments Investment in SL at Cost 640 1,800 970 430 2,880 4,280 6.410 2,440 3.920 Total Assets Liabilities and Shareholders' Equity Accounts payable Other current liabilities $ $ 660 430 1,090 480 260 740 250 2,000 930 3,180 3,920 Notes payable 400 Common shares 3,000 Retained earnings 1,920 5,320 Total Liabilities and Shareholders' Equity 6,410 Statement of Income for the Year Ended December 31, 2020 PI Sales S 1,600 Interest and investment income Gains (losses) on property, plant, equip. & int. assets 320 2,320 Cost of goods sold (710). Other expenses (140) Depreciation and amortization (110) Income tax expense (544) Net income 816 400 LILI SL $ 990 160 180 1,330 (430) (120) (80) (280) 420 Exhibit A Statement of Financial Position As at December 31, 2020 PI SL S $ Assets Cash Account receivable Inventory 290 860 980 2,130 150 610 720 1,480 Property, Plant, Equipment & Intangible Assets Other investments Investment in SL at Cost 640 1,800 970 430 2,880 4,280 6.410 2,440 3.920 Total Assets Liabilities and Shareholders' Equity Accounts payable Other current liabilities $ $ 660 430 1,090 480 260 740 250 2,000 930 3,180 3,920 Notes payable 400 Common shares 3,000 Retained earnings 1,920 5,320 Total Liabilities and Shareholders' Equity 6,410 Statement of Income for the Year Ended December 31, 2020 PI Sales S 1,600 Interest and investment income Gains (losses) on property, plant, equip. & int. assets 320 2,320 Cost of goods sold (710). Other expenses (140) Depreciation and amortization (110) Income tax expense (544) Net income 816 400 LILI SL $ 990 160 180 1,330 (430) (120) (80) (280) 420