the following pictures are the question
the following picture is the worksheet to be completed.
LO1, 2, 4, 6 On January 1, Year 7, the Vine Company purchased 60,000 of the 80,000 ordinary shares of the Devine Company for $80 per share. On that date, Devine had ordinary shares of $3,440,000, and retained earnings of $2,170,000. When acquired, Devine had inventories with fair values $300,000 less than carrying amount, a parcel of land with a fair value $270,000 greater than the carrying amount, and equipment with a fair value $270,000 less than carrying amount. There were also internally gen- erated patents with an estimated market value of $470,000 and a five-year remaining life. A long- term liability had a market value $170,000 greater than carrying amount; this liability was paid off December 31, Year 10. All other identifiable assets and liabilities of Devine had fair values equal to their carrying amounts. Devine's accumulated depreciation on the plant and equipment was $570,000 at the date of acquisition At the acquisition date, the equipment had an expected remaining useful life of ten years. Both companies use the straight-line method for all depreciation and amortization calculations and the FIFO inventory cost flow assumption. Assume a 40% income tax rate on all applicable items and that there were no impairment losses for goodwill. On September 1, Year 11, Devine sold a parcel of land to Vine and recorded a total non-operating gain of $470,000 Sales of finished goods from Vine to Devine totalled $1,070,000 in Year 10 and $2,070,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 33% to the Vine 383 CHAPTER 6 Intercompany Inventory and Land Profits Company. Devine's December 31, Year 10, inventory contained $121,000 of these sales, December 31, Year 11, inventory contained $621,000 of these sales. Sales of finished goods from Devine to Vine were $870,000 in Year 10 and $1,270,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 40% to the Devine Com- pany. Vine's December 31, Year 10, inventory contained $170,000 of these sales, the December 31, Year 11, inventory contained $570,000 of these sales. Vine's investment in Devine's account is carried in accordance with the cost method and includes advances to Devine of $270,000, which are also included in current liabilities There are no intercompany amounts other than those noted, except for the dividends of $500,000 (total amount) declared and paid by Devine. INCOME STATEMENTS For year ending December 31, Year 11 (in thousands of dollars) Vine Sales $13,000 Dividends, investment income, and gains 1.800 Total income 14,800 Cost of goods sold 10,100 Other expenses 500 Income taxes 200 Total expenses 10.800 Profit $ 4,000 Devine $4,400 2,400 6.800 2.900 500 200 3,600 $3,200 Devine $ 2,500 13.200 (3,600) STATEMENTS OF FINANCIAL POSITION December 31, Year 11 (in thousands of dollars) Vine Land $ 6,000 Plant and equipment 20,200 Accumulated depreciation (4,400) Investment in Devine, cost 5,070 Inventories 6.000 Cash and current receivables 2,360 Total assets $35.230 Ordinary shares $10,000 Retained earnings 10,600 Long-term liabilities 8,000 Deferred income taxes 1,600 Current liabilities 5.030 Total equity and liabilities $35,230 3,800 1.700 $17.600 $ 3,440 5.600 2,500 100 5,960 $17.600 Required (a) Show the allocation of the acquisition cost at acquisition and the related amortization schedule. Show and label all calculations. (b) Prepare a consolidated income statement with expenses classified by function. (c) Calculate consolidated retained earnings at December 31, Year 11. 384 (d) Prepare a consolidated statement of financial position for Vine Company at December 31, Year 11. (e) Assume that Devine's shares were trading at $75 per share shortly before and after the date of acquisition, and that this data was used to value non-controlling interest at the date of acquisi- tion. Calculate goodwill and non-controlling interest at December 31, Year 11. (f) Prepare the consolidated financial statements using the worksheet approach. (Adapted from a problem prepared by Peter Secord, St. Mary's University) Chapter 6: Problem 14 (page 354): Fill in the amount (S) for the following: Cost of 75% of Investment Implied valuelof 100% of Investment Book value of subsidiary's net assets Acquisition differential Allocated: Inventory Land Equipment Patents Long-term liability Goodwill $520,000 Amortization and Impairment of Acquisition Differential Balance, Jan. 1 Amortization & Impairment Balance, Dec. 31 Year 7 Years 7 - 10 Year 11 Year 11 Inventory Land Equipment Patents. Long-term li Goodwill Totals S655,000 Non-controlling interest Intercompany Amounts: (account names and amounts) 1 Page After Tax Intercompany Profit Schedule Before Tax Income Tax Land: Upstream gain Opening inventory - upstream Opening inventory - downstream Ending inventory - upstream Ending inventory - downstream Consolidated Income Statement, Year Ended Dec. 31, Year 11 Sales Dividends, investment income and gains Cost of goods sold Other expenses Income Taxes Net Income Attributed to: Parent's shareholders Non-controlling interest $6,320,000 Consolidated Balance Sheet, Dec. 31, Year 11 Land Plant & Equipment Accumulated depreciation Goodwill Deferred income taxes Inventories Cash and current receivables Total Assets Common shares Retained earnings Non-controlling interest Long-term liabilities Deferred income taxes Current liabilities $47,872,000 LO1, 2, 4, 6 On January 1, Year 7, the Vine Company purchased 60,000 of the 80,000 ordinary shares of the Devine Company for $80 per share. On that date, Devine had ordinary shares of $3,440,000, and retained earnings of $2,170,000. When acquired, Devine had inventories with fair values $300,000 less than carrying amount, a parcel of land with a fair value $270,000 greater than the carrying amount, and equipment with a fair value $270,000 less than carrying amount. There were also internally gen- erated patents with an estimated market value of $470,000 and a five-year remaining life. A long- term liability had a market value $170,000 greater than carrying amount; this liability was paid off December 31, Year 10. All other identifiable assets and liabilities of Devine had fair values equal to their carrying amounts. Devine's accumulated depreciation on the plant and equipment was $570,000 at the date of acquisition At the acquisition date, the equipment had an expected remaining useful life of ten years. Both companies use the straight-line method for all depreciation and amortization calculations and the FIFO inventory cost flow assumption. Assume a 40% income tax rate on all applicable items and that there were no impairment losses for goodwill. On September 1, Year 11, Devine sold a parcel of land to Vine and recorded a total non-operating gain of $470,000 Sales of finished goods from Vine to Devine totalled $1,070,000 in Year 10 and $2,070,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 33% to the Vine 383 CHAPTER 6 Intercompany Inventory and Land Profits Company. Devine's December 31, Year 10, inventory contained $121,000 of these sales, December 31, Year 11, inventory contained $621,000 of these sales. Sales of finished goods from Devine to Vine were $870,000 in Year 10 and $1,270,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 40% to the Devine Com- pany. Vine's December 31, Year 10, inventory contained $170,000 of these sales, the December 31, Year 11, inventory contained $570,000 of these sales. Vine's investment in Devine's account is carried in accordance with the cost method and includes advances to Devine of $270,000, which are also included in current liabilities There are no intercompany amounts other than those noted, except for the dividends of $500,000 (total amount) declared and paid by Devine. INCOME STATEMENTS For year ending December 31, Year 11 (in thousands of dollars) Vine Sales $13,000 Dividends, investment income, and gains 1.800 Total income 14,800 Cost of goods sold 10,100 Other expenses 500 Income taxes 200 Total expenses 10.800 Profit $ 4,000 Devine $4,400 2,400 6.800 2.900 500 200 3,600 $3,200 Devine $ 2,500 13.200 (3,600) STATEMENTS OF FINANCIAL POSITION December 31, Year 11 (in thousands of dollars) Vine Land $ 6,000 Plant and equipment 20,200 Accumulated depreciation (4,400) Investment in Devine, cost 5,070 Inventories 6.000 Cash and current receivables 2,360 Total assets $35.230 Ordinary shares $10,000 Retained earnings 10,600 Long-term liabilities 8,000 Deferred income taxes 1,600 Current liabilities 5.030 Total equity and liabilities $35,230 3,800 1.700 $17.600 $ 3,440 5.600 2,500 100 5,960 $17.600 Required (a) Show the allocation of the acquisition cost at acquisition and the related amortization schedule. Show and label all calculations. (b) Prepare a consolidated income statement with expenses classified by function. (c) Calculate consolidated retained earnings at December 31, Year 11. 384 (d) Prepare a consolidated statement of financial position for Vine Company at December 31, Year 11. (e) Assume that Devine's shares were trading at $75 per share shortly before and after the date of acquisition, and that this data was used to value non-controlling interest at the date of acquisi- tion. Calculate goodwill and non-controlling interest at December 31, Year 11. (f) Prepare the consolidated financial statements using the worksheet approach. (Adapted from a problem prepared by Peter Secord, St. Mary's University) Chapter 6: Problem 14 (page 354): Fill in the amount (S) for the following: Cost of 75% of Investment Implied valuelof 100% of Investment Book value of subsidiary's net assets Acquisition differential Allocated: Inventory Land Equipment Patents Long-term liability Goodwill $520,000 Amortization and Impairment of Acquisition Differential Balance, Jan. 1 Amortization & Impairment Balance, Dec. 31 Year 7 Years 7 - 10 Year 11 Year 11 Inventory Land Equipment Patents. Long-term li Goodwill Totals S655,000 Non-controlling interest Intercompany Amounts: (account names and amounts) 1 Page After Tax Intercompany Profit Schedule Before Tax Income Tax Land: Upstream gain Opening inventory - upstream Opening inventory - downstream Ending inventory - upstream Ending inventory - downstream Consolidated Income Statement, Year Ended Dec. 31, Year 11 Sales Dividends, investment income and gains Cost of goods sold Other expenses Income Taxes Net Income Attributed to: Parent's shareholders Non-controlling interest $6,320,000 Consolidated Balance Sheet, Dec. 31, Year 11 Land Plant & Equipment Accumulated depreciation Goodwill Deferred income taxes Inventories Cash and current receivables Total Assets Common shares Retained earnings Non-controlling interest Long-term liabilities Deferred income taxes Current liabilities $47,872,000
