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The X Company purchased 80% of the outstanding voting shares of the Y Company for $3,300,000 on July 1 st . 2018, at which time

The X Company purchased 80% of the outstanding voting shares of the Y Company for $3,300,000 on July 1st. 2018, at which time Ys retained earnings were $445,000 , accumulated depreciation $69,000 and common stock $2,050,000.

Below is the financial statements for the year ending December 31st.2022:-

BALANCE SHEETS

As at December 31st.2022

XY

Cash$ 390,000.$ 190,000

Accounts receivable. 290,0000.

Inventory..2,450,000. 510,000

Plant and equipment3,450,000.3,590,000

Accumulated depreciation( 840,000).( 400,000)

Investment in the Y Company at cost.3,300,000

TOTAL ASSETS$9,040,000..$3,890,000

Liabilities.$ 737,000$ 543,000

Common Stock 3,750,000..2,050,000

Retained Earnings 4,553,000...1,297,000

TOTAL LIABILITIES & OWNERS EQUITY$9,040,000$3,890,000

INCOME STATEMENTS

For the Year ending December 31st.2022

X...Y

Sales.$4,,450,000..$1,450,000

Dividend income 232,000

$ 4,682,000$1,450,000

Cost of sales. 2,590,000.. 490,000

Miscellaneous expenses.. 365,000.. 79,000

Administrative expenses... 89,000. 19,000

Income tax expense. 295,000. 165,000

3,339,000 735,000

NET INCOME..$1,343,000.$ 697,000

RETAINED EARNINGS STATEMENTS

XY

Balance, January 1, 2022.$3,800,000..$ 890,000

Net Income..1,343,000 697,000

5,143,0001,587,000

Dividends 590,000290,000

Retained Earnings, December 31st.2022.$4,553,000.$1,297,000

Additional Information:-

i. The inventory was undervalued by an amount which was equal to 20% of the acquisition differential and equipment by 40% with a remaining life of 8 years.

ii. During 2019, a goodwill impairment loss of $79,000 was recognized, and an impairment test conducted as at December 31st. 2022 indicated a further impairment loss of $29,000 had occurred.

iii. Amortization expense is grouped with cost of goods sold and impairment losses are grouped with administrative expenses.

iv. Y owes X $84,000 on December 31st.2022.

Required:-

I. Calculate:-

a. Consolidated goodwill at date of acquisition(5 marks)

b. Prepare an amortization table for year ending December 31st.2022(3marks)

ii. Prepare:-

a. Consolidated Net Income Statement for year ending December 31st.2022(4 marks)

b. Consolidated Retained Earnings at January 1st.2022(5 marks)

c. Consolidated Retained Earnings at December 31st.2022((3 marks)

iii. Compute the following balances for the consolidated income statement for year ending December 31st.2022:-

a. Cost of goods sold(1.5 marks)

b. Administrative expenses(1.5 marks)

c. Non-controlling interest for the income statement(1 mark)

iv. Compute the following balances for the consolidated balance sheet as at December 31st.2022:-

a. Plant & Equipment(2 marks)

b. Accumulated Depreciation(2 marks)

c. Non-controlling interest for the balance sheet(4 marks)

v. If X had used the Identifiable Net Asset Method to prepare the statements, what would be the amount of the reported goodwill and Non-Controlling interest on the consolidated balance sheet as at December 31st.2022(3 marks).

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