P Inc. purchased 80% of the voting shares of S Inc. for $800,000 cash on January 1, Year 4. On that date, Ss Common Stock and Retained Earnings were valued at $100,000 and $500,000 respectively. P uses the cost method to account for its investment.

Ss fair values approximated its carrying values with the following exception:

The equipment previously expensed by S had a fair value of $ 40,000, with an estimated remaining useful life of 8 years and no salvage value.

Ss current liabilities to third party had a fair value $10,000 less than book value. This liability was paid in Year 4.

The Financial Statements of P & S for the Year ended December 31, Year 8 are shown below:

Income Statements

P Inc. S Inc.

Sales $1,600,000 $900,000

Other Revenues 120,000 260,000

Less: Expenses:

Cost of Goods Sold: 800,000 500,000

Depreciation & Amortization Expense 60,000 50,000

Other Expenses 350,000 340,000

Income Tax Expense 170,000 200,000

Net Income $340,000 $70,000

Retained Earnings Statements

Balance, Jan 1, Year 7 1,200,000 970,000

Net Income 340,000 70,000

Less: Dividends (200,000) (100,000)

Retained Earnings $1,340,000 $940,000

Balance Sheets

P Inc. S Inc.

Cash 180,000 $220,000

Accounts Receivable 390,000 360,000

Inventory 280,000 200,000

Investments 800,000 10,000

Land 180,000 280,000

Equipment (net) 270,000 170,000

Total Assets $2,100,000 $1,240,000

Current Liabilities 160,000 200,000

Common Shares 600,000 100,000

Retained Earnings 1,340,000 940,000

Total Liabilities and Equity $2,100,000 $1,240,000

Other Information:

1. During Year 5, S sold a parcel of land to P for $150,000 cash. S had purchased this land in 2013 for $100,000. P sold the land to third party in Year 8.

2. During December Year 7, P sold inventory to S for $100,000 cash, the cost of the inventory to P was $70,000. 20% of these goods remained in Ss inventory at the end of Year 7. The inventory was sold to a third party during Year 8.

3. On December 30^th, Year 8, P sold inventory to S for $100,000, the cost of the inventory to P was $75,000. All the inventory remained in Ss inventory at the end of Year 8. S paid $60,000 cash on delivery and the remaining $40,000 on March 2^nd, Year 9.

4. The Common Shares of P & S did not change since the date of acquisition.

5. Both companies use straight line amortization exclusively for all assets and liabilities.

6. The effective tax rate for both companies is 40%.

7. P has recorded the investment in S at Cost.

8. For Consolidation P uses the FVE method.

Question 1:

Calculate Goodwill at time of acquisition.

Question 2:

Calculate Consolidated NI

Question 3:

On the Consolidated Income Statements for year 8, what is Consolidated Sales?

Question 4:

On the Consolidated Income Statements for year 8, what is Consolidated COGS?

Question 5:

On the Consolidated Income Statements for year 8, what is Consolidated Other Income?

Question 6:

On the Consolidated Income Statements for year 8, what is Consolidated Depreciation Expense?

Question 7:

On the Consolidated Income Statements for year 8, what is Consolidated value for Equipment (net)?

Question 8:

On the Consolidated Balance Sheet as at year-end 8, what is Consolidated Inventory?

Question 9:

On the Consolidated Balance Sheet as at year-end 8, what is the NCI amount?

Question 10:

On the Consolidated Balance Sheet as at year-end 8, what is Consolidated DIT ?