On January 1, Year 4, Cyrus Inc. paid $914,000 in cash to acquire all of the ordinary shares of Fazli Company. On that date, Fazli's retained earnings were $200,000. All of Fazli's assets and liabilities had fair values equal to carrying amounts except for an investment in bonds, which was worth $12,988 more than carrying amount and will mature on December 31, Year 8. The recoverable amount for goodwill was $200,000 at the end of Years 4 and 5. In Year 4. Cyrus reported net income from its own operations (exclusive of any income from Fazli) of $125,000 and declared no dividends. In Year 4, Fazli reported net income of $80,000 and paid a $30,000 cash dividend. Cyrus uses the cost method to report its investment in Fazli and uses the effective interest method to amortize premiums or discounts on investment in bonds. The amortization of the acquisition differential pertaining to the investment in bonds was $2,351 in Year 4 and $2,468 in Year 5. The financial statements for Cyrus and Fazli for the year ended December 31, Year 5, were as follows: The financial statements for Cyrus and Fazli for the year ended December 31, Year 5, were as follows: $ $ $ $ $ $ Cyrus 928,000 (674,000) 254,000 814,000 254,000 (104,000) 964, eee 714, eee 914, eee Fazli 844,000 (710,000) 134,000 250,000 134,000 (42,000) 342,000 314,000 $ $ Revenues and investment income Expenses Profit Retained earnings, 1/1/Year 5 Profit Dividends paid Retained earnings, 12/31/Year 5 Equipment (net) Investment in Fazli Investment in bonds Receivables and inventory Cash Total assets Ordinary shares Retained earnings Liabilities Total equities and liabilities $ $ 414, eee 94, eee $ 2,136, eee $ 558, eee 964,000 614,000 $ 2,136,000 300,000 484,000 152,000 $ 1,250,000 $ 484,000 342,000 424,000 $ 1,250,000 Required: (a) Prepare a schedule of changes to the acquisition differential for Years 4 and 5. (Leave no cells blank - be certain to enter "0" wherever required. Omit $ sign in your response. Negative/Deductible amounts should be indicated by a minus sign.) Balance Jan. 1 Year 4 $ 12988 200000 Changes Year 4 Year 5 $ 2351 $ 2468 Balance Dec. 31 Year 5 $ 8169 Investment in bonds Goodwill 0 0 200000 $ 230000 $ 2351 $ 2468 $ 2100000 (b) Calculate investment in bonds and goodwill for the consolidated balance sheet at the end of Year 5 (Omit S sign in your response.) Investment in bonds Goodwill 3 308169 200000 (c) Calculate investment income from Fazil and investment in Fazli account balances for Cyrus's separate entity financial statements for Year 5, assuming Cyrus uses the (Omit $ sign in your response.) (1) Cost method Investment income from Fazli Investment in Fazli Cost Method $ 42000 $ 914000 (ii) Equity method Equity Method... Investment income from Fazli Investment in Fazli $ (d) Whether the parent's method of accounting for its investment in Fazli affect the amount reported for expenses in its December 31, Year 5, consolidated income statement? O Yes O No (e) Whether the parent's method of accounting for its investment in Fazli affect the amount reported for investment in bonds in its December 31, Year 5, consolidated balance sheet? Yes O No (f) What is Cyrus's January 1, Year 5, retained earnings account balance on its separate entity financial statements assuming Cyrus accounts for its investment in Fazli using the: (i) Cost method? (ii) Equity method? (Omit $ sign in your response.) (i) (ii) Cost Method Equity Method Retained earnings $ 964000 $ 892000 (g) What are consolidated retained earnings at January 1, Year 5, assuming Cyrus accounts for its investment in Fazli using the: (i) Cost method? (ii) Equity method? (Omit $ sign in your response.) Retained earnings $ 964000 (i) Cost Method (ii) Equity Method $ 892000 On January 1, Year 4, Cyrus Inc. paid $914,000 in cash to acquire all of the ordinary shares of Fazli Company. On that date, Fazli's retained earnings were $200,000. All of Fazli's assets and liabilities had fair values equal to carrying amounts except for an investment in bonds, which was worth $12,988 more than carrying amount and will mature on December 31, Year 8. The recoverable amount for goodwill was $200,000 at the end of Years 4 and 5. In Year 4. Cyrus reported net income from its own operations (exclusive of any income from Fazli) of $125,000 and declared no dividends. In Year 4, Fazli reported net income of $80,000 and paid a $30,000 cash dividend. Cyrus uses the cost method to report its investment in Fazli and uses the effective interest method to amortize premiums or discounts on investment in bonds. The amortization of the acquisition differential pertaining to the investment in bonds was $2,351 in Year 4 and $2,468 in Year 5. The financial statements for Cyrus and Fazli for the year ended December 31, Year 5, were as follows: The financial statements for Cyrus and Fazli for the year ended December 31, Year 5, were as follows: $ $ $ $ $ $ Cyrus 928,000 (674,000) 254,000 814,000 254,000 (104,000) 964, eee 714, eee 914, eee Fazli 844,000 (710,000) 134,000 250,000 134,000 (42,000) 342,000 314,000 $ $ Revenues and investment income Expenses Profit Retained earnings, 1/1/Year 5 Profit Dividends paid Retained earnings, 12/31/Year 5 Equipment (net) Investment in Fazli Investment in bonds Receivables and inventory Cash Total assets Ordinary shares Retained earnings Liabilities Total equities and liabilities $ $ 414, eee 94, eee $ 2,136, eee $ 558, eee 964,000 614,000 $ 2,136,000 300,000 484,000 152,000 $ 1,250,000 $ 484,000 342,000 424,000 $ 1,250,000 Required: (a) Prepare a schedule of changes to the acquisition differential for Years 4 and 5. (Leave no cells blank - be certain to enter "0" wherever required. Omit $ sign in your response. Negative/Deductible amounts should be indicated by a minus sign.) Balance Jan. 1 Year 4 $ 12988 200000 Changes Year 4 Year 5 $ 2351 $ 2468 Balance Dec. 31 Year 5 $ 8169 Investment in bonds Goodwill 0 0 200000 $ 230000 $ 2351 $ 2468 $ 2100000 (b) Calculate investment in bonds and goodwill for the consolidated balance sheet at the end of Year 5 (Omit S sign in your response.) Investment in bonds Goodwill 3 308169 200000 (c) Calculate investment income from Fazil and investment in Fazli account balances for Cyrus's separate entity financial statements for Year 5, assuming Cyrus uses the (Omit $ sign in your response.) (1) Cost method Investment income from Fazli Investment in Fazli Cost Method $ 42000 $ 914000 (ii) Equity method Equity Method... Investment income from Fazli Investment in Fazli $ (d) Whether the parent's method of accounting for its investment in Fazli affect the amount reported for expenses in its December 31, Year 5, consolidated income statement? O Yes O No (e) Whether the parent's method of accounting for its investment in Fazli affect the amount reported for investment in bonds in its December 31, Year 5, consolidated balance sheet? Yes O No (f) What is Cyrus's January 1, Year 5, retained earnings account balance on its separate entity financial statements assuming Cyrus accounts for its investment in Fazli using the: (i) Cost method? (ii) Equity method? (Omit $ sign in your response.) (i) (ii) Cost Method Equity Method Retained earnings $ 964000 $ 892000 (g) What are consolidated retained earnings at January 1, Year 5, assuming Cyrus accounts for its investment in Fazli using the: (i) Cost method? (ii) Equity method? (Omit $ sign in your response.) Retained earnings $ 964000 (i) Cost Method (ii) Equity Method $ 892000