On January 1, Year 7, the Vine Company purchased 60,000 of the 80,000 ordinary shares of the Devine Company for $80 per share On that date, Devine had ordinary shares of $3,560,000, and retained earnings of $2,070,000 When acquired, Devine had inventories with fair values $130,000 less than carrying amount, a parcel of land with a fair value $170,000 greater than the carrying amount, and equipment with a fair value $170,000 less than carrying amount There were also internally generated patents with an estimated market value of $370,000 and a five year remaining life A long term liability had a market value $70,000 greater than carrying amount this liability was paid off December 31, Year 10 All other identifiable assets and liabilities of Devine had fair values equal to their carrying amounts Devines accumulated depreciation on the plant and equipment was $470,000 at the date of acquisition The year 11 financial statements for Vine and Devine were as follows INCOME STATEMENTS For year ending December 31, Year 11 (in thousands of dollars) Vine Devine Sales $ 14,200 $ 5,600 Dividends, investment income and gains 3,000 3,600 Total income 17,200 9,200 Cost of goods sold 11,900 4,100 Other expenses 500 500 Income taxes 200 200 Total expenses (12,600 ) (4,800 ) Profit $ 4,600 $ 4,400 STATEMENTS OF FINANCIAL POSITION December 31, Year 11 (in thousands of dollars) Vine Devine Land $ 6,000 $ 2,500 Plant and equipment 18,000 11,000 Accumulated depreciation (6,600 ) (5,800 ) Investment in Devine, cost 4,970 Inventories 3,800 1,600 Cash and current receivables 1,240 1,700 Total assets $ 27,410 $ 11,000 Ordinary shares $ 10,000 $ 3,560 Retained earnings 10,200 6,500 Long term liabilities 4,000 500 Deferred income taxes 2,800 100 Current liabilities 410 340 Total equity and liabilities $ 27,410 $ 11,000 Additional Information At the acquisition date, the equipment had an expected remaining useful life of ten years Both companies use the straight line method for all depreciation and amortization calculations and the FIFO inventory cost flow assumption Assume a 40 income tax rate on all applicable items and that there were no impairment losses for goodwill On September 1, Year 11, Devine sold a parcel of land to Vine and recorded a total non operating gain of $370,000 Sales of finished goods from Vine to Devine totalled $970,000 in Year 10 and $1,970,000 in Year 11 These sales were priced to provide a gross profit margin on selling price of 33 33 to the Vine Company Devines December 31, Year 10, inventory contained $291,000 of these sales December 31, Year 11, inventory contained $591,000 of these sales Sales of finished goods from Devine to Vine were $770,000 in Year 10 and $1,170,000 in Year 11 These sales were priced to provide a gross profit margin on selling price of 40 to the Devine Company Vines December 31, Year 10, inventory contained $70,000 of these sales the December 31, Year 11, inventory contained $470,000 of these sales Vines investment in Devines account is carried in accordance with the cost method and includes advances to Devine of $170,000, which are also included in current liabilities There are no intercompany amounts other than those noted, except for the dividends of $500,000 (total amount) declared and paid by Devine Required (a) The allocation of the acquisition cost at acquisition and the related changes to acquisition differential schedule (Leave no cells blank be certain to enter 0 wherever required Enter your answers in dollars, not in thousands of dollars Input all values as positive numbers Do not round gross profit percentage for intermediate computations Omit $ sign in your response ) Acquisition cost Allocation Acquisition January 1, Year 7 Cost $ Implied value of 100 investment Current Assets Ordinary Shares $ Retained Earnings Acquisition differential $ Allocation Life Inventory Cr 1 Land Dr Equipment Cr 10 Patents Dr 5 Long term Liability Cr 4 Subtotal Dr Balance Goodwill Dr Dr Changes to Acquisition Differential Table Allocation Life Changes Balance YR 7 YR 10 YR 11 Dec 3, YR 11 Inventory Cr 1 Dr Land Dr Dr Equipment Cr 10 Dr Dr Cr Patents Dr 5 Cr Cr Long term liability Cr 4 Dr Goodwill Dr Dr Dr Cr Cr Dr (b) Prepare a consolidated income statement with expenses classified by function (Enter your answers in dollars, not in thousands of dollars Do not round gross profit percentage for intermediate computations Input all values as positive numbers ) (c) Calculate consolidated retained earnings at December 31, Year 11 (Enter your answer in dollars, not in thousands of dollars Do not round gross profit percentage for intermediate computations Omit $ sign in your response ) Consolidated retained earnings $ (d) Prepare a consolidated statement of financial position for Vine Company at December 31, Year 11 (Negative amounts should be indicated by a minus sign Enter your answers in dollars, not in thousands of dollars Do not round gross profit percentage for intermediate computations )

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On January 1, Year 7, the Vine Company purchased 60,000 of the 80,000 ordinary shares of the Devine Company for $80 per share. On that

On January 1, Year 7, the Vine Company purchased 60,000 of the 80,000 ordinary shares of the Devine Company for $80 per share. On that date, Devine had ordinary shares of $3,560,000, and retained earnings of $2,070,000. When acquired, Devine had inventories with fair values $130,000 less than carrying amount, a parcel of land with a fair value $170,000 greater than the carrying amount, and equipment with a fair value $170,000 less than carrying amount. There were also internally generated patents with an estimated market value of $370,000 and a five-year remaining life. A long-term liability had a market value $70,000 greater than carrying amount; this liability was paid off December 31, Year 10. All other identifiable assets and liabilities of Devine had fair values equal to their carrying amounts. Devines accumulated depreciation on the plant and equipment was $470,000 at the date of acquisition.

The year 11 financial statements for Vine and Devine were as follows:

INCOME STATEMENTS
For year ending December 31, Year 11
(in thousands of dollars)
	Vine			Devine
Sales	$	14,200		$	5,600
Dividends, investment income and gains		3,000			3,600
Total income		17,200			9,200
Cost of goods sold		11,900			4,100
Other expenses		500			500
Income taxes		200			200
Total expenses		(12,600	)		(4,800	)
Profit	$	4,600		$	4,400

STATEMENTS OF FINANCIAL POSITION
December 31, Year 11
(in thousands of dollars)
	Vine			Devine
Land	$	6,000		$	2,500
Plant and equipment		18,000			11,000
Accumulated depreciation		(6,600	)		(5,800	)
Investment in Devine, cost		4,970
Inventories		3,800			1,600
Cash and current receivables		1,240			1,700
Total assets	$	27,410		$	11,000
Ordinary shares	$	10,000		$	3,560
Retained earnings		10,200			6,500
Long-term liabilities		4,000			500
Deferred income taxes		2,800			100
Current liabilities		410			340
Total equity and liabilities	$	27,410		$	11,000

Additional Information

At the acquisition date, the equipment had an expected remaining useful life of ten years. Both companies use the straight-line method for all depreciation and amortization calculations and the FIFO inventory cost flow assumption. Assume a 40% income tax rate on all applicable items and that there were no impairment losses for goodwill.
On September 1, Year 11, Devine sold a parcel of land to Vine and recorded a total non-operating gain of $370,000.
Sales of finished goods from Vine to Devine totalled $970,000 in Year 10 and $1,970,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 33.33% to the Vine Company. Devines December 31, Year 10, inventory contained $291,000 of these sales; December 31, Year 11, inventory contained $591,000 of these sales.
Sales of finished goods from Devine to Vine were $770,000 in Year 10 and $1,170,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 40% to the Devine Company. Vines December 31, Year 10, inventory contained $70,000 of these sales; the December 31, Year 11, inventory contained $470,000 of these sales.
Vines investment in Devines account is carried in accordance with the cost method and includes advances to Devine of $170,000, which are also included in current liabilities.
There are no intercompany amounts other than those noted, except for the dividends of $500,000 (total amount) declared and paid by Devine.

Required:

(a) The allocation of the acquisition cost at acquisition and the related changes to acquisition differential schedule. (Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in dollars, not in thousands of dollars. Input all values as positive numbers. Do not round gross profit percentage for intermediate computations. Omit $ sign in your response.)

Acquisition cost Allocation
Acquisition January 1, Year 7
Cost		$
Implied value of 100% investment
Current Assets:Ordinary Shares	$
Retained Earnings

Acquisition differential		$

Allocation:		Life
Inventory	Cr	1
Land	Dr
Equipment	Cr	10
Patents	Dr	5
Long - term Liability	Cr	4
Subtotal	Dr
Balance: Goodwill	Dr
	Dr

Changes to Acquisition Differential Table:
	Allocation		Life	Changes				Balance
				YR 7 - YR 10		YR 11		Dec. 3, YR 11
Inventory		Cr	1		Dr
Land		Dr							Dr
Equipment		Cr	10		Dr		Dr		Cr
Patents		Dr	5		Cr		Cr
Long - term liability		Cr	4		Dr
Goodwill		Dr							Dr
		Dr			Cr		Cr		Dr

(b) Prepare a consolidated income statement with expenses classified by function. (Enter your answers in dollars, not in thousands of dollars. Do not round gross profit percentage for intermediate computations. Input all values as positive numbers.)

(c) Calculate consolidated retained earnings at December 31, Year 11. (Enter your answer in dollars, not in thousands of dollars. Do not round gross profit percentage for intermediate computations. Omit $ sign in your response.)

Consolidated retained earnings $

(d) Prepare a consolidated statement of financial position for Vine Company at December 31, Year 11. (Negative amounts should be indicated by a minus sign. Enter your answers in dollars, not in thousands of dollars. Do not round gross profit percentage for intermediate computations.)