Question 3 (40 marks) On May 1, 2013, Peat Co purchased all of Sorbet Ltd s issued common shares for $630,000 At the acquisition date, Sorbet s financial statements included the following balances Share capital $400,000 Retained earnings 210,000 Goodwill 10,000 At the acquisition date, Sorbet s identifiable assets and liabilities were equal to their fair values, except in the case of inventory that had a book value of $80,000 and a fair value of $86,000, and equipment that had a book value of $360,000 and a fair value of $370,000 The equipment was originally purchased for $480,000 At the acquisition date, the equipment had a remaining useful life of 5 years and was amortized using the straight line method All the inventory that Sorbet had on hand at the acquisition date was sold by October 2013 Sorbet s goodwill has not shown indications of impairment Both Peat and Sorbet have April 30th year ends and did not have any intercompany sales with each other The financial statements for Peat and Sorbet at April 30, 2015 are presented on the following pages Statement of Financial Position April 30, 2015 Peat Co Sorbet Ltd Assets Current assets Cash $ 52,000 $ 161,600 Accounts receivable 100,000 80,000 Inventory 120,000 170,000 272,000 411,600 Non current assets Equipment, net 558,000 368,000 Furniture and fixtures, net 51,000 51,600 Investment in Sorbet Ltd 630,000 Goodwill 10,000 1,239,000 429,600 Total assets $ 1,511,000 $ 841,200 Liabilities and shareholders equity Current liabilities Accounts payable $ 69,000 $ 19,600 Non current liabilities Loan payable 22,000 32,000 Total liabilities 91,000 51,600 Shareholders equity Share capital 1,000,000 400,000 Retained earnings 420,000 389,600 1,420,000 789,600 Total liabilities and shareholders equity $ 1,511,000 $ 841,200 Condensed Statement of Income For the year ended April 30, 2015 Peat Co Sorbet Ltd Sales $ 250,000 $ 180,000 Expenses 170,000 130,000 Net income $ 80,000 $ 50,000 Statement of Changes in Equity For the year ended April 30, 2015 Peat Co Sorbet Ltd Share capital $ 1,000,000 $ 400,000 Retained earnings, May 1, 2014 340,000 339 600 Net income 80,000 50,000 Retained earnings, April 30, 2015 420,000 389,600 Total shareholders equity $ 1,420,000 $ 789,600 Required Prepare Peat s consolidated financial statements for April 30, 2015 Ignore income taxes Question 4 (20 marks) On June 30, 2014, Pewter Ltd gave 28,000 shares to Sterling Co in exchange for 70 of Sterling s outstanding shares At the time of the exchange, Pewter s shares had a fair value of $22 50 per share The post acquisition statements of financial position and Sterling s fair values are shown below Statement of Financial Position As of June 30, 2014 Sterling Co Pewter Ltd Book value Fair Value Assets Current assets Cash $ 750,000 $ 37,500 $ 37,500 Accounts receivable 1,500,000 112,500 112,500 Inventory 150,000 37,500 37,500 2,400,000 187,500 Non current assets Land 750,000 225,000 300,000 Equipment 2,250,000 375,000 412,500 Accumulated amortization (900,000) (112,500) Investment in Sterling 630,000 2,730,000 487,500 Total assets $ 5,130,000 $ 675,000 Liabilities and shareholders equity Current liabilities Accounts payable $ 750,000 $ 75,000 75,000 Loan payable 300,000 1,050,000 75,000 Shareholders equity Common shares 2,580,000 150,000 Retained earnings 1,500,000 450,000 4,080,000 600,000 Total liabilities and shareholders equity $ 5,130,000 $ 675,000 Required a) Calculate Pewter s consolidated goodwill b) Prepare Pewter s consolidated statement of financial position at June 30, 2014 using the entity theory method of consolidation 1 Question 3 (40 marks) On May 1, 2013, Peat Co purchased all of Sorbet Ltd 's issued common shares for $630,000 At the acquisition date, Sorbet's financial statements included the following balances Share capital Retained earnings Goodwill $400,000 210,000 10,000 At the acquisition date, Sorbet's identifiable assets and liabilities were equal to their fair values, except in the case of inventory that had a book value of $80,000 and a fair value of $86,000, and equipment that had a book value of $360,000 and a fair value of $370,000 The equipment was originally purchased for $480,000 At the acquisition date, the equipment had a remaining useful life of 5 years and was amortized using the straight line method All the inventory that Sorbet had on hand at the acquisition date was sold by October 2013 Sorbet's goodwill has not shown indications of impairment Both Peat and Sorbet have April 30 th year ends and did not have any intercompany sales with each other The financial statements for Peat and Sorbet at April 30, 2015 are presented on the following pages 2 Statement of Financial Position April 30, 2015 Peat Co Sorbet Ltd 52,000 100,000 120,000 272,000 $ 161,600 80,000 170,000 411,600 558,000 51,000 630,000 1,239,000 $ 1,511,000 Assets Current assets Cash Accounts receivable Inventory 368,000 51,600 10,000 429,600 $ 841,200 $ 69,000 $ 19,600 22,000 91,000 32,000 51,600 1,000,000 420,000 1,420,000 $ 1,511,000 400,000 389,600 789,600 $ 841,200 $ Non current assets Equipment, net Furniture and fixtures, net Investment in Sorbet Ltd Goodwill Total assets Liabilities and shareholders' equity Current liabilities Accounts payable Non current liabilities Loan payable Total liabilities Shareholders' equity Share capital Retained earnings Total liabilities and shareholders' equity Condensed Statement of Income For the year ended April 30, 2015 Peat Co Sales Expenses Net income $ 250,000 170,000 $ 80,000 Sorbet Ltd $ 180,000 130,000 $ 50,000 3 Statement of Changes in Equity For the year ended April 30, 2015 Peat Co Sorbet Ltd Share capital $ 1,000,000 $ 400,000 Retained earnings, May 1, 2014 Net income Retained earnings, April 30, 2015 Total shareholders' equity 340,000 80,000 420,000 $ 1,420,000 339 600 50,000 389,600 $ 789,600 Required Prepare Peat's consolidated financial statements for April 30, 2015 Ignore income taxes 4 Question 4 (20 marks) On June 30, 2014, Pewter Ltd gave 28,000 shares to Sterling Co in exchange for 70 of Sterling's outstanding shares At the time of the exchange, Pewter's shares had a fair value of $22 50 per share The post acquisition statements of financial position and Sterling's fair values are shown below Statement of Financial Position As of June 30, 2014 Sterling Co Book value Fair Value Pewter Ltd Assets Current assets Cash Accounts receivable Inventory Non current assets Land Equipment Accumulated amortization Investment in Sterling Total assets Liabilities and shareholders' equity Current liabilities Accounts payable Loan payable Shareholders' equity Common shares Retained earnings Total liabilities and shareholders' equity $ 750,000 1,500,000 150,000 2,400,000 $ 37,500 112,500 37,500 187,500 750,000 2,250,000 (900,000) 630,000 2,730,000 $ 5,130,000 225,000 375,000 (112,500) 487,500 $ 675,000 300,000 412,500 $ $ 75,000 750,000 300,000 1,050,000 2,580,000 1,500,000 4,080,000 $ 5,130,000 75,000 75,000 150,000 450,000 600,000 $ 675,000 Required a) b) $ 37,500 112,500 37,500 Calculate Pewter's consolidated goodwill Prepare Pewter's consolidated statement of financial position at June 30, 2014 using the entity theory method of consolidation

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Question 3 (40 marks) On May 1, 2013, Peat Co. purchased all of Sorbet Ltd.?s issued common shares for $630,000. At the acquisition date, Sorbet?s

Question 3 (40 marks) On May 1, 2013, Peat Co. purchased all of Sorbet Ltd.?s issued common shares for $630,000. At the acquisition date, Sorbet?s financial statements included the following balances: Share capital $400,000 Retained earnings 210,000 Goodwill 10,000 At the acquisition date, Sorbet?s identifiable assets and liabilities were equal to their fair values, except in the case of inventory that had a book value of $80,000 and a fair value of $86,000, and equipment that had a book value of $360,000 and a fair value of $370,000. The equipment was originally purchased for $480,000. At the acquisition date, the equipment had a remaining useful life of 5 years and was amortized using the straight-line method. All the inventory that Sorbet had on hand at the acquisition date was sold by October 2013. Sorbet?s goodwill has not shown indications of impairment. Both Peat and Sorbet have April 30th year-ends and did not have any intercompany sales with each other. The financial statements for Peat and Sorbet at April 30, 2015 are presented on the following pages. ? Statement of Financial Position April 30, 2015 Peat Co. Sorbet Ltd. Assets: Current assets: Cash $ 52,000 $ 161,600 Accounts receivable 100,000 80,000 Inventory 120,000 170,000 272,000 411,600 Non-current assets: Equipment, net 558,000 368,000 Furniture and fixtures, net 51,000 51,600 Investment in Sorbet Ltd. 630,000 - Goodwill ___-___ 10,000 1,239,000 429,600 Total assets $ 1,511,000 $ 841,200 Liabilities and shareholders? equity: Current liabilities: Accounts payable $ 69,000 $ 19,600 Non-current liabilities: Loan payable 22,000 32,000 Total liabilities 91,000 51,600 Shareholders? equity: Share capital 1,000,000 400,000 Retained earnings 420,000 389,600 1,420,000 789,600 Total liabilities and shareholders? equity $ 1,511,000 $ 841,200 Condensed Statement of Income For the year ended April 30, 2015 Peat Co. Sorbet Ltd. Sales $ 250,000 $ 180,000 Expenses 170,000 130,000 Net income $ 80,000 $ 50,000 ? Statement of Changes in Equity For the year ended April 30, 2015 Peat Co. Sorbet Ltd. Share capital $ 1,000,000 $ 400,000 Retained earnings, May 1, 2014 340,000 339.600 Net income 80,000 50,000 Retained earnings, April 30, 2015 420,000 389,600 Total shareholders? equity $ 1,420,000 $ 789,600 Required: Prepare Peat?s consolidated financial statements for April 30, 2015. Ignore income taxes. ? Question 4 (20 marks) On June 30, 2014, Pewter Ltd. gave 28,000 shares to Sterling Co. in exchange for 70% of Sterling?s outstanding shares. At the time of the exchange, Pewter?s shares had a fair value of $22.50 per share. The post-acquisition statements of financial position and Sterling?s fair values are shown below. Statement of Financial Position As of June 30, 2014 Sterling Co.______ Pewter Ltd. Book value Fair Value Assets: Current assets: Cash $ 750,000 $ 37,500 $ 37,500 Accounts receivable 1,500,000 112,500 112,500 Inventory 150,000 37,500 37,500 2,400,000 187,500 Non-current assets: Land 750,000 225,000 300,000 Equipment 2,250,000 375,000 412,500 Accumulated amortization (900,000) (112,500) Investment in Sterling 630,000 __ -___ 2,730,000 487,500 Total assets $ 5,130,000 $ 675,000 Liabilities and shareholders? equity: Current liabilities: Accounts payable $ 750,000 $ 75,000 75,000 Loan payable 300,000 _____ 1,050,000 75,000 Shareholders? equity: Common shares 2,580,000 150,000 Retained earnings 1,500,000 450,000 4,080,000 600,000 Total liabilities and shareholders? equity $ 5,130,000 $ 675,000 Required: a) Calculate Pewter?s consolidated goodwill. b) Prepare Pewter?s consolidated statement of financial position at June 30, 2014 using the entity theory method of consolidation. image text in transcribed

1 Question 3 (40 marks) On May 1, 2013, Peat Co. purchased all of Sorbet Ltd.'s issued common shares for $630,000. At the acquisition date, Sorbet's financial statements included the following balances: Share capital Retained earnings Goodwill $400,000 210,000 10,000 At the acquisition date, Sorbet's identifiable assets and liabilities were equal to their fair values, except in the case of inventory that had a book value of $80,000 and a fair value of $86,000, and equipment that had a book value of $360,000 and a fair value of $370,000. The equipment was originally purchased for $480,000. At the acquisition date, the equipment had a remaining useful life of 5 years and was amortized using the straight-line method. All the inventory that Sorbet had on hand at the acquisition date was sold by October 2013. Sorbet's goodwill has not shown indications of impairment. Both Peat and Sorbet have April 30 th year-ends and did not have any intercompany sales with each other. The financial statements for Peat and Sorbet at April 30, 2015 are presented on the following pages. 2 Statement of Financial Position April 30, 2015 Peat Co. Sorbet Ltd. 52,000 100,000 120,000 272,000 $ 161,600 80,000 170,000 411,600 558,000 51,000 630,000 ___-___ 1,239,000 $ 1,511,000 Assets: Current assets: Cash Accounts receivable Inventory 368,000 51,600 10,000 429,600 $ 841,200 $ 69,000 $ 19,600 22,000 91,000 32,000 51,600 1,000,000 420,000 1,420,000 $ 1,511,000 400,000 389,600 789,600 $ 841,200 $ Non-current assets: Equipment, net Furniture and fixtures, net Investment in Sorbet Ltd. Goodwill Total assets Liabilities and shareholders' equity: Current liabilities: Accounts payable Non-current liabilities: Loan payable Total liabilities Shareholders' equity: Share capital Retained earnings Total liabilities and shareholders' equity Condensed Statement of Income For the year ended April 30, 2015 Peat Co. Sales Expenses Net income $ 250,000 170,000 $ 80,000 Sorbet Ltd. $ 180,000 130,000 $ 50,000 3 Statement of Changes in Equity For the year ended April 30, 2015 Peat Co. Sorbet Ltd. Share capital $ 1,000,000 $ 400,000 Retained earnings, May 1, 2014 Net income Retained earnings, April 30, 2015 Total shareholders' equity 340,000 80,000 420,000 $ 1,420,000 339.600 50,000 389,600 $ 789,600 Required: Prepare Peat's consolidated financial statements for April 30, 2015. Ignore income taxes. 4 Question 4 (20 marks) On June 30, 2014, Pewter Ltd. gave 28,000 shares to Sterling Co. in exchange for 70% of Sterling's outstanding shares. At the time of the exchange, Pewter's shares had a fair value of $22.50 per share. The post-acquisition statements of financial position and Sterling's fair values are shown below. Statement of Financial Position As of June 30, 2014 Sterling Co.______ Book value Fair Value Pewter Ltd. Assets: Current assets: Cash Accounts receivable Inventory Non-current assets: Land Equipment Accumulated amortization Investment in Sterling Total assets Liabilities and shareholders' equity: Current liabilities: Accounts payable Loan payable Shareholders' equity: Common shares Retained earnings Total liabilities and shareholders' equity $ 750,000 1,500,000 150,000 2,400,000 $ 37,500 112,500 37,500 187,500 750,000 2,250,000 (900,000) 630,000 2,730,000 $ 5,130,000 225,000 375,000 (112,500) __ -___ 487,500 $ 675,000 300,000 412,500 $ $ 75,000 750,000 300,000 1,050,000 2,580,000 1,500,000 4,080,000 $ 5,130,000 75,000 _____ 75,000 150,000 450,000 600,000 $ 675,000 Required: a) b) $ 37,500 112,500 37,500 Calculate Pewter's consolidated goodwill. Prepare Pewter's consolidated statement of financial position at June 30, 2014 using the entity theory method of consolidation