On January 1, Year 7, the Parent Company purchased 60,000 of the 100,000 ordinary shares of the Subsidiary Company for $60 per share. On that date, Subsidiary had ordinary shares of $3,200,000, and retained earnings of $1,800,000. There were also internally generated Trademark with an estimated market value of $450,000 and a 4-year remaining life. A long-term liability had a market value $210,000 greater than carrying amount this liability was paid off December 31, Year 10. All other identifiable assets and liabilities of Subsidiary had fair values equal to their carrying amounts. Subsidiary’s accumulated depreciation on the plant and equipment was $400,000 at the date of acquisition.

The year 11 financial statements for Parent and Subsidiary were as follows:

INCOME STATEMENTS
for year ending December 31, Year 11
	Parent				Subsidiary
Sales	$	14,600,000			$	6,000,000
Dividends, investment income and gains		2,500,000				3,200,000
Total income		17,100,000				9,200,000
Cost of goods sold		11,680,000				4,200,000
Other expenses		400,000				300,000
Income taxes		400,000				375,000
Total expenses		12,480,000				4,875,000
Profit	$	4,620,000			$	4,325,000

STATEMENTS OF FINANCIAL POSITION
December 31, Year 11
	Parent				Subsidiary
Land	$	6,000,000			$	2,500,000
Plant and equipment		18,600,000				11,600,000
Accumulated depreciation		(6,000,000	)			(5,200,000	)
Investment in Subsidiary, cost		3,900,000
Inventories		4,400,000				2,200,000
Cash and current receivables		760,000				100,000
Total assets	$	27,660,000			$	11,200,000
Ordinary shares	$	10,000,000			$	3,200,000
Retained earnings		8,800,000				6,060,000
Long term liabilities		4,600,000				1,700,000
Deferred income taxes		2,200,000				80,000
Current liabilities		2,060,000				160,000
Total equity and liabilities	$	27,660,000			$	11,200,000

Additional Information

Both companies use the straight-line method for all depreciation and amortization calculations and the FIFO inventory cost flow assumption. Assume a 25% income tax rate on all applicable items. Goodwill was impaired by $40,000 in Year 10 and by $50,000 in year 11.

On September 1, Year 11, Subsidiary sold a parcel of land to Parent and recorded a total non-operating gain of $500,000.

Sales of finished goods from Parent to Subsidiary totalled $1,170,000 in Year 10 and $2,040,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 35% to the Parent Company. Subsidiary’s December 31, Year 10, inventory contained $360,000 of these sales; December 31, Year 11, inventory contained $610,000 of these sales.

Sales of finished goods from Subsidiary to Parent were $930,000 in Year 10 and $970,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 40% to the Subsidiary Company. Parent’s December 31, Year 10, inventory contained $170,000 of these sales; the December 31, Year 11, inventory contained $570,000 of these sales.

The amount still owing by Subsidiary on inventory purchases is $130,000.

Parent’s investment in Subsidiary’s account is carried in accordance with the cost method and includes advances to Subsidiary of $300,000, which are also included in current liabilities.

There are no intercompany amounts other than those noted, except for the dividends of $470,000 (total amount) declared and paid by Subsidiary.

Method for adjusting depreciation at acquisition is the net method.

Required:

(a) Calculate the acquisition differential and goodwill at acquisition. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated with a minus sign.)

(b) Calculate the NCI at acquisition.

(c) Changes to Acquisition Differential. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated with a minus sign.)

(d) Calculate the Intercompany Profits for year 11.

(e) Calculate the Net income for year 11 the portion attributable to Shareholders of Parent and the NCI. (Negative amounts should be indicated with a minus sign.)

(f) Calculation of Ending Retained Earnings End Y11. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated with a minus sign.)

(g) Calculate the NCI at Decemebr 31st, year 11.

(h) Prepare the Consolidated Income Statement and Statement of Financial Position at the end of year 11. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated with a minus sign.)