On January $1,$ Year $7,$ the Large Company purchased $56,000$ of the $80,000$ ordinary shares of the Small Company for $$75$ per share.

On that date, Small had ordinary shares of $$3,200,000,$ and retalned earnings of $$1,800,000.$ When acquired, Small had inventorles

with falr values $$50,000$ less than carrying amount, a parcel of land with a falr value $$200,000$ greater than the carrylng amount, All

other Identifiable assets and liabilitles of Small had fair values equal to their carrying amounts. Small's accumulated depreciation on the

plant and equipment was $$440,000$ at the date of acquisition.

The year $11$ financial statements for Large and Small were as follows:

Additional Information

At the acquisition date, the equipment had an expected remaIning useful life of $5$ years. Both companles use the straight$-$line

method for all depreclation and amortization calculations and the FIFO Inventory cost flow assumption. Assume a $30\%$ Income

tax rate on all applicable Items. Impairment of goodwill in Year $8$ amounted to $$25,000$ and In year $11,$ amounted to $$30,000.$

Method for adjusting depreclation at acquisition is the net method.

On August $1,$ Year $11,$ Small sold a parcel of land to Large and recorded a total non$-$operating galn of $$300,000.$

Sales of finished goods from Large to Small totalled $$1,070,000$ in Year $10$ and $$2,070,000$ in Year $11.$ These sales were priced to

provide a gross profit margin on selling price of $25\%$ to the Large Company. Small's December $31,$ Year $10,$ Inventory contained

$$321,000$ of these sales; December $31,$ Year $11,$ Inventory contalned $$621,000$ of these sales.

On January $1,$ Year $8,$ Small purchased and sold copler equipment to Large at a galn of $$100,000$

Sales of finished goods from Small to Large were $$870,000$ in Year $10$ and $$1,270,000$ in Year $11.$ These sales were priced to

provide a gross profit margin on selling price of $30\%$ to the Small Company. Large's December $31,$ Year $10,$ Inventory contalned

$$170,000$ of these sales; the December $31,$ Year $11,$ Inventory contained $$570,000$ of these sales.

The amount still owing by Small on Inventory purchases is $$120,000.$

Large's Investment In Small's account is carrled In accordance with the cost method and Includes advances to Small of

$$250,000,$ which are also Included In current liabilities. NOW SHOW STEPS AND Calculate the NCl at acquisition.

NCl at Acquisition