QUESTION #$3(35$ MARKS$)$

On January $1^{st}*2021,$ the $x$ Company acquired $90\%$ of the $Y$ Company for $$774,000$ in cash.

Below are the balance sheets and the income statements of $x$ and $Y$ for the Year $2024.$

BALANCE SHEET

As at December ${31}^{st},2024$

Cash

X$.$ Y

Accounts Receivable

Inventories.

Land

Plant& Equipment $280,000.$ $ $42,000$

Accumulated Depn. $184,000112,000168,000$

Accumulated Depn. $..40,00090,000\mathrm{.}140,000$

Investment in Y Company$($cost$).400,0001,200,000$

TOTALASSETS $(160,000)(720,000)\mathrm{.}774,000.....0.$

Accounts Payable $$1,630,000.$ $$920,000$

Common Shares.... $\mathrm{.}490,000.\mathrm{.}193,000$

Retained Earnings $-1/1/2024800,000.440,000$

Net Income $12/31/2024.274,000146,000$

Dividends Paid $12/31/202486,000155,000(20,000)(14,000)$

Retained Earnings $12/31/2024$

$340,000$

$287,000$

TOTAL LIABILITIES & OWNERS' EQUITY $$1,630,000$dots $920,{000}_{?}$

INCOME STATEMENT

For the year ended December ${31}^{st}\mathrm{.}2024$

X$.$ Y

Sales revenues.

Dividend Income.

$$1,200,000$

TOTAL REVENUUES

Cost of Goods Sold.

Selling and administrative expenses.

Financing expenses.

Income Tax expenses.

NET INCOME

dotsdotsdots$\mathrm{.}12,600$dotsdots

$\mathrm{.}800,000$

Additional Information: $-$

On January $1^{st}\mathrm{.}2021,$ the following items on Y$\text{'}$s balance sheet had differences between the carrying value and fair value:$-$

Goodwill was valued at $$30,000,000$ at December $31,2023$ and at $$20,000$ at December $31,2024.$

On January $1^{st.}\mathrm{.}2021,Y$ had a retained earnings balance of $$180,000.$

The companies sell merchandise to each other. $x$ sells to $Y$ at a gross profit rate of $35\%$; $Y$ earns a gross profit of $40\%$ from its sales to $Y.$

The December ${31}^{st},2023,$ inventory of $x$ contained purchases made from $Y$ amounting to $$7,000.$ The inventory of $Y$ contained purchases from $x$ amounting to $$10,000.$

During $2024Y$ made sales of $$150,000$ to $x.$ The December ${31}^{st}\mathrm{.}2024$ inventory of $x$ contained merchandise purchased from $Y$ amounting to $$33,000.$

The inventory of $Y$ contained purchases from $x$ of $$45,000.$

On July $1^{st}\mathrm{.}2022,Y$ sold equipment to $x$ at a fair value of $$100,000$ and recorded a gain of $$25,000.$ The equipment had a remaining useful life of $5$ years on the date of the intercompany transaction. The equipment is still held within the group at December ${31}^{st}\mathrm{.}2024.$

Both companies have a tax rate of $40\%.$

Required:

$1..$ Calculate X$\text{'}$s consolidated goodwill at January marks$)$

$2.$ Complete the amortization schedule from January $1^{st}\mathrm{.}2021$ to December ${31}^{st}.2024.(6$ marks$)$

AMORTISATION TABLE

$\backslash$table$[[$JANUARY$1/2022,$RETAINED EARNINGS,INCOME STATEMENT,BALANCE SHEET$],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,]]$

Prepare the schedule for the sale of inventories between $x$ and Y$.(4$ marks$)$

$\backslash$table$[[,$BEFORE TAX,TAX $(40\%),$AFTER TAX$],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,]]$

Prepare the schedule for the intercompany sale of equipment $(3$ marks$)$

$\backslash$table$[[,$BEFORE TAX,TAX $(40\%),$AFTER TAX$],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,]]$

Compute Consolidated Net Income for year ended December ${31}^{st}.2024(8$ marks$)$

Compute the Consolidated Retained earnings for the year ended december $31$st $2024$