Question 1 (75 Marks) Financial Statements of Peter Ltd. and its 80%-owned subsidiary Sam Ltd. as at December 31, Year 5, are presented below: Statement of Financial Position as at December 31 Year 5 Peter Ltd Sam Ltd Cash $ 8,100.00 $ 20,600.00 Accounts Receivables $ 70,000.00 $ 55,000.00 Inventory $ 35,000.00 $ 46,000.00 Investment in Sam $ 129,200.00 $ Deferred Taxes $ $ Plant $ 200,000.00 $ 104,000.00 Accumulated Depreciation -$ 88,000.00 -$ 30,000.00 $ 354,300.00 $ 195,600.00 Accounts Payable Other Liabilities Common Shares Retained Earnings $ 56,000.00 $ 70,100.00 $ 5,000.00 $ 5,500.00 $ 225,000.00 $ 50,000.00 $ 68,300.00 $ 70,000.00 $ 354,300.00 $ 195,600.00 Statement of Income for the year ended December 31, Year 5 Peter Ltd Sam Ltd Sales $ 535,400.00 $ 270,000.00 Dividend Income $ 9,900.00 $ $ 545,300.00 $ 270,000.00 $ 364,000.00 $ 206,000.00 $ 78,400.00 $ 24,100.00 Costs of Sales Selling expenses Admn expenses (including depreciation and goodwill impairment) Income taxes $ 46,300.00 $ 20,700.00 $ 13,800.00 $ 6,200.00 $ 502,500.00 $ 257,000.00 Net Income $ 42,800.00 $ 13,000.00 Statement of retained earnings Opening balance Add Net income Less dividend Closing balance Piter Ltd Sam Ltd $ 45,500.00 $ 68,000.00 $ 42,800.00 $ 13,000.00 -$ 20,000.00 $ 11,000.00 $ 68,300.00 $ 70,000.00 Additional Information: Peter acquired 8,000 ordinary shares of Sam on January 1, Year 1, for $129,200. Sam had retained earnings of $12,000 on that date. . . On January 1, Year 1, fair values were equal to carrying amounts except for the following: Inventory - Book value $50,000, Fair value $32,000 Patent - Book value $0, Fair value $14,000 . The patent of Sam had a remaining legal life of eight years on January 1, Year 1, and any goodwill was to be tested annually for impairment. As a result, impairment losses occurred as follows: Year 2 - $25,000, Year 4 - $16,400, Year 5 - 22800 . On January 1, Year 5, the inventories of Peter contained items purchased from Sam on which Sam had made a profit of $1,900. During Year 5, Sam sold goods to Packer for $92,000. Sam made a profit of $3,300 on goods remaining in Peter's inventory at December 31, Year 5. At December 31 Year 5, Peter owed Sam $21,000 for sales made to Peter during the year. . On January 1, Year 3, Sam sold equipment to Peter at a price that was $21,000 in excess of its carrying amount. The equipment had an estimated remaining life of six years on that date. Peter sold a tract of land to Sam in Year 2 at a profit of $7,000. This land is still held by Sam at the end of Year 5 and is included in the balance of Property, Plant and Equipment. Assume a corporate tax rate of 40%. Required: a. Calculate acquisition differential and goodwill (6 Marks); b. Prepare amortization schedule (6 Marks) c. Prepare schedule for inter-company profit on inventories (6 Marks) d. Schedule of gains on inter-company transfer of Plant (6 Marks) e. Income statement for the year ended December 31, Year 5 showing Net Income attributable to Peter's shareholders and to non-Controlling interests. (16 Marks)