On January 1, Year 4, Cyrus Inc. pald $927,000 in cash to acqulre all of the ordinary shares of Kelvin Company. On that date, Kelvin's retained earnings were $213,000. All of Kelvin's assets and liabilitles had falr values equal to carrying amounts except for an Investment in bonds, which was worth $13,156 more than carrying amount and will mature on December 31 , Year 8 . The recoverable amount for goodwill was $80,000 at the end of Years 4 and 5. In Year 4, Cyrus reported net income from its own operations (exclusive of any income from Kelvin) of $138,000 and declared no dlvidends. In Year 4, Kelvin reported net Income of $103,000 and paid a $53,000 cash dividend. Cyrus uses the cost method to report Its Investment in Kelvin and uses the effectlve Interest method to amortize premlums or discounts on Investment in bonds. The amortization of the acquisition differential pertaining to the Investment in bonds was $2,617 In Year 4 and $2,636 in Year 5 . The financlal statements for Cyrus and Kelvin for the year ended December 31 , Year 5 , were as follows: 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. Negative/Deductible amounts should be indicated by a minus sign. Omit \$ sign in your response.) (b) Calculate Investment In bonds and goodwill for the consolidated balance sheet at the end of Year 5 . (Omit $ sign In your response.) (c) Calculate Investment Income from Kelvin and Investment in Kelvin account balances for Cyrus's separate entity financial statements for Year 5 , assuming Cyrus uses the: (Omit $ sign in your response.) (i) Cost method (ii) Equity method (d) Whether the parent's method of accounting for its Investment in Kelvin affect the amount reported for expenses In Its December 31 , Year 5 , consolidated income statement? Yes No (e) Whether the parent's method of accounting for its Investment in Kelvin affect the amount reported for investment in bonds in its December 31, Year 5 , consolidated balance sheet? Yes No (f) What is Cyrus's January 1, Year 5 , retained earnings account balance on its separate entity financlal statements assuming Cyrus accounts for its Investment in Kelvin using the: (i) Cost method? (II) Equlty method? (Omit $sign in your response.) (g) What are consolidated retained earnings at January 1 , Year 5 , assuming Cyrus accounts for its Investment in Kelvin using the: (i) Cost method? (II) Equlty method? (Omit \$ sign in your response.) On January 1, Year 4, Cyrus Inc. pald $927,000 in cash to acqulre all of the ordinary shares of Kelvin Company. On that date, Kelvin's retained earnings were $213,000. All of Kelvin's assets and liabilitles had falr values equal to carrying amounts except for an Investment in bonds, which was worth $13,156 more than carrying amount and will mature on December 31 , Year 8 . The recoverable amount for goodwill was $80,000 at the end of Years 4 and 5. In Year 4, Cyrus reported net income from its own operations (exclusive of any income from Kelvin) of $138,000 and declared no dlvidends. In Year 4, Kelvin reported net Income of $103,000 and paid a $53,000 cash dividend. Cyrus uses the cost method to report Its Investment in Kelvin and uses the effectlve Interest method to amortize premlums or discounts on Investment in bonds. The amortization of the acquisition differential pertaining to the Investment in bonds was $2,617 In Year 4 and $2,636 in Year 5 . The financlal statements for Cyrus and Kelvin for the year ended December 31 , Year 5 , were as follows: 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. Negative/Deductible amounts should be indicated by a minus sign. Omit \$ sign in your response.) (b) Calculate Investment In bonds and goodwill for the consolidated balance sheet at the end of Year 5 . (Omit $ sign In your response.) (c) Calculate Investment Income from Kelvin and Investment in Kelvin account balances for Cyrus's separate entity financial statements for Year 5 , assuming Cyrus uses the: (Omit $ sign in your response.) (i) Cost method (ii) Equity method (d) Whether the parent's method of accounting for its Investment in Kelvin affect the amount reported for expenses In Its December 31 , Year 5 , consolidated income statement? Yes No (e) Whether the parent's method of accounting for its Investment in Kelvin affect the amount reported for investment in bonds in its December 31, Year 5 , consolidated balance sheet? Yes No (f) What is Cyrus's January 1, Year 5 , retained earnings account balance on its separate entity financlal statements assuming Cyrus accounts for its Investment in Kelvin using the: (i) Cost method? (II) Equlty method? (Omit $sign in your response.) (g) What are consolidated retained earnings at January 1 , Year 5 , assuming Cyrus accounts for its Investment in Kelvin using the: (i) Cost method? (II) Equlty method? (Omit \$ sign in your response.)
