Answered step by step
Verified Expert Solution
Question
1 Approved Answer
On January 2. Year 4, Poplar Ltd. purchased 80% of the outstanding shares of Spruce Ltd. for $2.060,000. At that date, Spruce had common shares
On January 2. Year 4, Poplar Ltd. purchased 80% of the outstanding shares of Spruce Ltd. for $2.060,000. At that date, Spruce had common shares of $500,000 and retained earnings of $1.310,000 and accumulated depreciation of $660,000. Poplar acquired the Spruce shares to obtain control of mineral rights owned by Spruce. At the date of acquisition, these mineral rights were valued at $765,000, were not recognized on Spruce's separate-entity balance sheet, and had an useful life of 10 years. Except for the mineral rights, the carrying amount of the recorded assets and liabilities of Spruce were equal to their fair values. On December 31, Year 7, the trial balances of the two companies were as follows: Cash Accounts receivable Inventory Plant and equipment Investment in Spruce (cost) Investment in bonds Cost of goods sold Other expenses Interest expense Income tax expense Dividends Poplar $ 1,060,000 2,120,000 Spruce $ 506,000 416,000 2,066,000 3,180,000 14,840,000 2,960,000 2,060,000 494,000 2,460,000 860,200 968,000 306,000 44,000 694,800 410,000 600,000 250,000 $28,026,800 $8,268,200 $2,538,500 Accounts payable Accumulated depreciation: plant and equipment Bonds payable Premium on bonds payable: Common shares Retained earnings, January 1 Sales Dividend revenue Interest revenue $2,552,000 4,096,600 500,000 8,000 1 4,500,000 11,210,200 4,960,000 200,000 $28,026,800 1,060,000 500,000 2,082,200 2,060,000 27,500 $8,268,200 Additional Information Additional Information The Year 7 net incomes of the two companies are as follows: Poplar Ltd. Spruce Ltd. $ 980,000 524,500 .The mineral rights owned by Spruce have Increased in value since the date of acquisition and were worth $930,400 at December 31, Year 7. . . On January 2, Year 5, Poplar sold equipment to Spruce for $560,000. The equipment had a carrying amount of $448,000 at the time of the sale. The remaining useful life of the equipment was 5 years. The Year 7 opening inventories of Poplar contained $506,000 of merchandise purchased from Spruce during Year 6. Spruce had recorded a gross profit of $202,400 on this merchandise.. During Year 7, Spruce's sales to Poplar totalled $1,006,000. These sales were made at a gross profit rate of 35%. Poplar's ending inventory contains $306,000 of merchandise purchased from Spruce. Other expenses include depreciation expense. Tax allocation will be at a rate of 40%. Required: (a) Prepare the following consolidated financial statements for Year 7: (i) Income statement (Input all values as positive numbers.) Poplar Ltd. Consolidated Income Statement Year 7 A < Prev 2 of 2 www Next
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started