The following financial statements were prepared on December 31 , Year 6. Retained Earnings Statement Additional information Pearl purchased 80 percent of the outstanding voting shares of Silver for $2,560,000 on July 1 , Year 2 , at which time Silver's retained earnings were $400,000. The acquisition differential on this date was allocated as follows: - 40 percent to undervalued inventory - 40 percent to equipment - remaining useful life 8 years - Balance to goodwill During year 6, an impairment test conducted as at December 31. On that day, an impairment loss of $15,000 has occurred. Amortization expense is grouped with cost of goods sold and impairment losses are grouped with administrative expenses. Required: 1. Show the calculation of Goodwill: (3) Cost of 80% investment Implied value of 100% Carrying amount of Silver's net assets: Common shares Retained earnings Acquisition differential 2.Calculate the amount of Non-controlling Interest: (1) NCl: 3. Prepare the amortization/impairment schedule for year 6:(3) Amortization/lmpairment Schedule: \begin{tabular}{lccccc} & Balance & \multicolumn{3}{c}{ Amortization } & Balance \\ & July 1 & Dec. 31 & Dec. 31 & Dec. 31 & Dec. 31 \\ & Year 2 & Year 2 & Years 3 to 5 & Year 6 & Year 6 \\ & & & & \\ Inventory & & & & \\ Equipment & & & & \\ Goodwill & & & & & \\ Total & & & & & \end{tabular} 4. Show the calculation of consolidated profit and its allocation between shareholders of parent and NCl: (5) Net income Pearl Less: Dividends from Silver Adjusted net income of Pearl Net income Silver Less: Acquisition differential amortization Adjusted income of Silver Consolidated profit Attributed to: Shareholders of Pearl NCl 5.Consolidated Income Statement for year 6: (10) Pearl Company Consolidated Income Statement for the Year Ended December 31, Year 6 Revenues: Sales Interest Income Total revenues Expenses: Cost of sales Miscellaneous expense Admin expense Income tax Total Expenses Net income Attributable to: Pearl's shareholders Non-controlling interest 6. Consolidated Retained Earnings Statement :(8) Pearl Company Consolidated Retained Earnings Statement for the Year Ended December 31, Year 6 \begin{tabular}{|l|l|l|} \hline & Amount & Amount \\ \hline Balance of Retained earnings of pearl & & \\ \hline Balance of Retained earnings of Silver: & & \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline \end{tabular} 8 The following financial statements were prepared on December 31 , Year 6. Retained Earnings Statement Additional information Pearl purchased 80 percent of the outstanding voting shares of Silver for $2,560,000 on July 1 , Year 2 , at which time Silver's retained earnings were $400,000. The acquisition differential on this date was allocated as follows: - 40 percent to undervalued inventory - 40 percent to equipment - remaining useful life 8 years - Balance to goodwill During year 6, an impairment test conducted as at December 31. On that day, an impairment loss of $15,000 has occurred. Amortization expense is grouped with cost of goods sold and impairment losses are grouped with administrative expenses. Required: 1. Show the calculation of Goodwill: (3) Cost of 80% investment Implied value of 100% Carrying amount of Silver's net assets: Common shares Retained earnings Acquisition differential 2.Calculate the amount of Non-controlling Interest: (1) NCl: 3. Prepare the amortization/impairment schedule for year 6:(3) Amortization/lmpairment Schedule: \begin{tabular}{lccccc} & Balance & \multicolumn{3}{c}{ Amortization } & Balance \\ & July 1 & Dec. 31 & Dec. 31 & Dec. 31 & Dec. 31 \\ & Year 2 & Year 2 & Years 3 to 5 & Year 6 & Year 6 \\ & & & & \\ Inventory & & & & \\ Equipment & & & & \\ Goodwill & & & & & \\ Total & & & & & \end{tabular} 4. Show the calculation of consolidated profit and its allocation between shareholders of parent and NCl: (5) Net income Pearl Less: Dividends from Silver Adjusted net income of Pearl Net income Silver Less: Acquisition differential amortization Adjusted income of Silver Consolidated profit Attributed to: Shareholders of Pearl NCl 5.Consolidated Income Statement for year 6: (10) Pearl Company Consolidated Income Statement for the Year Ended December 31, Year 6 Revenues: Sales Interest Income Total revenues Expenses: Cost of sales Miscellaneous expense Admin expense Income tax Total Expenses Net income Attributable to: Pearl's shareholders Non-controlling interest 6. Consolidated Retained Earnings Statement :(8) Pearl Company Consolidated Retained Earnings Statement for the Year Ended December 31, Year 6 \begin{tabular}{|l|l|l|} \hline & Amount & Amount \\ \hline Balance of Retained earnings of pearl & & \\ \hline Balance of Retained earnings of Silver: & & \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline \end{tabular} 8
