Problem 2 (90 marks): Griffith purchased 75% of Barb's common stock on January 1, 2015 for $150,000. The financial statements of Griffith Ltd. and Barb Ltd. as at December 31, 2019 are shown below: Balance Sheets At December 31, 2019 Griffith Ltd. Barb Ltd. Assets Cash $ 14,000 $ 16,800 Receivables 25,000 21,000 Inventory 45,000 50,000 Property, plant and equipment 195,000 260,000 Accumulated amortization (35,000) (40,000) Other assets 79,600 Investment in Barb 150.000 $ 473,600 $ 307,800 Liabilities and Shareholders' equity Current liabilities $ 36,400 $ 37,800 Long-term liabilities 102,500 Common shares 350,000 125,000 Retained earnings 87,200 42.500 $ 473,600 $ 307,800 Retained earnings, Jan 1 Net income Dividends Retained earnings Statements of Retained Earnings For the year ended December 31, 2019 Griffith Ltd. 77,600 34,600 25.000 87.200 Barb Ltd. 25,000 29,500 12.000 $42.500 Sales revenue Other income Income Statements For the year ended December 31, 2019 Griffith Ltd. $ 430,200 42,400 472,600 Barb Ltd. $ 270,000 270.000 Cost of goods sold Depreciation expense General and administration expenses Interest expense Income taxes expense 350,000 18,000 57,000 173,000 28,000 19,000 9,500 11,000 240.500 13,000 438.000 24 CAN nen T%204455%20Mid-term%2 Home 472.600 270,000 Cost of goods sold Depreciation expense General and administration expenses Interest expense Income taxes expense 350,000 18,000 57,000 173,000 28,000 19,000 9,500 11,000 240,500 29.500 13,000 438,000 34,600 Net income $ $ Additional information: 1. Griffith purchased 75% of Barb's common stock on January 1, 2015 for $150,000. 2. On that date, Barb's reported a retained earnings balance of $20,000 and common stock of $125,000. Barb's net assets were equal to fair market value except for equipment which was undervalued on the accounting records in the amount of $16,000 and land which was undervalued on the accounting records in the amount of $8,000. The equipment had a remaining useful life of 10 years as of that date. 3. Annual impairment tests of goodwill showed in losses of $11,000 in 2017 and $3,000 in 2019. 4. On June 1, 2019, Barb borrowed $20,000 from Griffith. The one-year note had interest rate of 9%. Both the principal and accrued interest will be paid on maturity. 5. Barb's sales during 2019 included $100,000 of sales to Griffith. Goods purchased from Barb and included in Griffith's inventories were $50,000 at the end of 2018 and $40,000 at the end of 2019. Barb's mark up on sales to Griffith is 30%. 6. On October 1, 2019, Griffith sold equipment to Barb for $85,000. The book value of the equipment on Griffith's records at date of sale was $55,000. The remaining useful life of the equipment on that date was 5 years. 7. On January 1, 2018, Barb sold a building to Griffith for $90,000. The book value of the building on Barb's records at date of sale was $100,000. The remaining useful life of the building on that date was 10 years. 8. Griffith uses the cost method. 9. Assume a 40% corporate tax rate. I Required: 1. Prepare the following schedules - show all your calculations preferably using the alphabet to show where you got your figures from (a) Prepare the calculation and allocation of acquisition differential schedule (b) Prepare the acquisition differential amortization and goodwill impairment schedule C) Prepare the intercompany transactions, unrealized profits on intercompany transactions and deferred taxes schedules. (d) Calculate consolidated net income for 2019 with income attributed to parent and non-controlling interests. (e) Prepare the consolidated income statement in good form (1) Calculate consolidated retained earnings - Jan. 1, 2019 (g) Prepare the consolidated statement of retained earnings in good form 1 Barb's records at date of sale was $100,000. The remaining useful life of the building on that date was 10 years. 8. Griffith uses the cost method. 9. Assume a 40% corporate tax rate. Required: 1. Prepare the following schedules - show all your calculations preferably using the alphabet to show where you got your figures from. (a) Prepare the calculation and allocation of acquisition differential schedule (b) Prepare the acquisition differential amortization and goodwill impairment schedule C) Prepare the intercompany transactions, unrealized profits on intercompany transactions and deferred taxes schedules. (d) Calculate consolidated net income for 2019 with income attributed to parent and non-controlling interests. (e) Prepare the consolidated income statement in good form (f) Calculate consolidated retained earnings - Jan. 1, 2019 (g) Prepare the consolidated statement of retained earnings in good form (h) Calculate NCI (balance sheet) - method 1 or method 2 (h) Prepare the consolidated balance sheet in good form. 2. Prepare the working paper eliminating journal entries for the inter-company sale of the equipment in 2019. Problem 2 (90 marks): Griffith purchased 75% of Barb's common stock on January 1, 2015 for $150,000. The financial statements of Griffith Ltd. and Barb Ltd. as at December 31, 2019 are shown below: Balance Sheets At December 31, 2019 Griffith Ltd. Barb Ltd. Assets Cash $ 14,000 $ 16,800 Receivables 25,000 21,000 Inventory 45,000 50,000 Property, plant and equipment 195,000 260,000 Accumulated amortization (35,000) (40,000) Other assets 79,600 Investment in Barb 150.000 $ 473,600 $ 307,800 Liabilities and Shareholders' equity Current liabilities $ 36,400 $ 37,800 Long-term liabilities 102,500 Common shares 350,000 125,000 Retained earnings 87,200 42.500 $ 473,600 $ 307,800 Retained earnings, Jan 1 Net income Dividends Retained earnings Statements of Retained Earnings For the year ended December 31, 2019 Griffith Ltd. 77,600 34,600 25.000 87.200 Barb Ltd. 25,000 29,500 12.000 $42.500 Sales revenue Other income Income Statements For the year ended December 31, 2019 Griffith Ltd. $ 430,200 42,400 472,600 Barb Ltd. $ 270,000 270.000 Cost of goods sold Depreciation expense General and administration expenses Interest expense Income taxes expense 350,000 18,000 57,000 173,000 28,000 19,000 9,500 11,000 240.500 13,000 438.000 24 CAN nen T%204455%20Mid-term%2 Home 472.600 270,000 Cost of goods sold Depreciation expense General and administration expenses Interest expense Income taxes expense 350,000 18,000 57,000 173,000 28,000 19,000 9,500 11,000 240,500 29.500 13,000 438,000 34,600 Net income $ $ Additional information: 1. Griffith purchased 75% of Barb's common stock on January 1, 2015 for $150,000. 2. On that date, Barb's reported a retained earnings balance of $20,000 and common stock of $125,000. Barb's net assets were equal to fair market value except for equipment which was undervalued on the accounting records in the amount of $16,000 and land which was undervalued on the accounting records in the amount of $8,000. The equipment had a remaining useful life of 10 years as of that date. 3. Annual impairment tests of goodwill showed in losses of $11,000 in 2017 and $3,000 in 2019. 4. On June 1, 2019, Barb borrowed $20,000 from Griffith. The one-year note had interest rate of 9%. Both the principal and accrued interest will be paid on maturity. 5. Barb's sales during 2019 included $100,000 of sales to Griffith. Goods purchased from Barb and included in Griffith's inventories were $50,000 at the end of 2018 and $40,000 at the end of 2019. Barb's mark up on sales to Griffith is 30%. 6. On October 1, 2019, Griffith sold equipment to Barb for $85,000. The book value of the equipment on Griffith's records at date of sale was $55,000. The remaining useful life of the equipment on that date was 5 years. 7. On January 1, 2018, Barb sold a building to Griffith for $90,000. The book value of the building on Barb's records at date of sale was $100,000. The remaining useful life of the building on that date was 10 years. 8. Griffith uses the cost method. 9. Assume a 40% corporate tax rate. I Required: 1. Prepare the following schedules - show all your calculations preferably using the alphabet to show where you got your figures from (a) Prepare the calculation and allocation of acquisition differential schedule (b) Prepare the acquisition differential amortization and goodwill impairment schedule C) Prepare the intercompany transactions, unrealized profits on intercompany transactions and deferred taxes schedules. (d) Calculate consolidated net income for 2019 with income attributed to parent and non-controlling interests. (e) Prepare the consolidated income statement in good form (1) Calculate consolidated retained earnings - Jan. 1, 2019 (g) Prepare the consolidated statement of retained earnings in good form 1 Barb's records at date of sale was $100,000. The remaining useful life of the building on that date was 10 years. 8. Griffith uses the cost method. 9. Assume a 40% corporate tax rate. Required: 1. Prepare the following schedules - show all your calculations preferably using the alphabet to show where you got your figures from. (a) Prepare the calculation and allocation of acquisition differential schedule (b) Prepare the acquisition differential amortization and goodwill impairment schedule C) Prepare the intercompany transactions, unrealized profits on intercompany transactions and deferred taxes schedules. (d) Calculate consolidated net income for 2019 with income attributed to parent and non-controlling interests. (e) Prepare the consolidated income statement in good form (f) Calculate consolidated retained earnings - Jan. 1, 2019 (g) Prepare the consolidated statement of retained earnings in good form (h) Calculate NCI (balance sheet) - method 1 or method 2 (h) Prepare the consolidated balance sheet in good form. 2. Prepare the working paper eliminating journal entries for the inter-company sale of the equipment in 2019