On January 2, Year 4, Poplar Ltd. purchased 80% of the outstanding shares of Spruce Ltd. for $2,050,000. At that date, Spruce had common shares of $500,000 and retained earnings of $1,300,000 and accumulated depreciation of $650,000. 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 $762,500, were not recognized on Spruce's separate-entity balance sheet and had an indefinite useful life 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 recevable Inventory Plant and equipment Invesment in Spruce (coet Invesment in bonds Cost af goods sold Other expenses In terestexpense Income tax expense Dividends 1,050,000 00002056.000 05,000 406,000 150000 2056,000 14700,000 2950,000 2050000 493.000 58,500 2,450,000 967000 43000 400,000 9000250,000 600,000 27,799,000 8223,500 Accounts payable Accumulated depreciatan plant and equipment Bands payable Premium on bonds payeble Common shares Retained earnings,January 1 S 2542000 2528,500 400,500 1050,000 500,000 8,000 4500,000 500,000 11,008,500 2068,500 950000 2050.000 Dividend reveue 27,789,000 8223,500 Additional Information The Year 7 netincomes of the wo companies are as follows Poplar Ltd Spruce Ltd 1000,000 524000 The mineral rights owned by Spruce have increased in value since the date of acquisiton and were worth $929.500 atDecember 31, Year 7 On January 2, Year 5, Spruce sold equipment to Poplar for $550,000. The equipment had a carrying amount of $440,000 at the time of the sale. The remaining useful life of the equipment was five years. The Year 7 opening inventories of Poplar contained S505,000 of merchandise purchased from Spruce during Year 6. Spruce had recorded a gross profit of $202,000 on this merchandise During Year 7, Spruce's sales to Poplar totalled $1,005,000 These sales were made at a gross profit rate of 40% Poplar's ending inventory contains $305,000 of merchandise purchased from Spruce Other expenses include depreciation expense and copyright amortization expense , Tax allocation will be at a rate of 40% On January 2, Year 4, Poplar Ltd. purchased 80% of the outstanding shares of Spruce Ltd. for $2,050,000. At that date, Spruce had common shares of $500,000 and retained earnings of $1,300,000 and accumulated depreciation of $650,000. 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 $762,500, were not recognized on Spruce's separate-entity balance sheet and had an indefinite useful life 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 recevable Inventory Plant and equipment Invesment in Spruce (coet Invesment in bonds Cost af goods sold Other expenses In terestexpense Income tax expense Dividends 1,050,000 00002056.000 05,000 406,000 150000 2056,000 14700,000 2950,000 2050000 493.000 58,500 2,450,000 967000 43000 400,000 9000250,000 600,000 27,799,000 8223,500 Accounts payable Accumulated depreciatan plant and equipment Bands payable Premium on bonds payeble Common shares Retained earnings,January 1 S 2542000 2528,500 400,500 1050,000 500,000 8,000 4500,000 500,000 11,008,500 2068,500 950000 2050.000 Dividend reveue 27,789,000 8223,500 Additional Information The Year 7 netincomes of the wo companies are as follows Poplar Ltd Spruce Ltd 1000,000 524000 The mineral rights owned by Spruce have increased in value since the date of acquisiton and were worth $929.500 atDecember 31, Year 7 On January 2, Year 5, Spruce sold equipment to Poplar for $550,000. The equipment had a carrying amount of $440,000 at the time of the sale. The remaining useful life of the equipment was five years. The Year 7 opening inventories of Poplar contained S505,000 of merchandise purchased from Spruce during Year 6. Spruce had recorded a gross profit of $202,000 on this merchandise During Year 7, Spruce's sales to Poplar totalled $1,005,000 These sales were made at a gross profit rate of 40% Poplar's ending inventory contains $305,000 of merchandise purchased from Spruce Other expenses include depreciation expense and copyright amortization expense , Tax allocation will be at a rate of 40%