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The income statements for Paste Company and its subsidiaries, Waste Company and Baste Company, were prepared for the year ended December 31, Year 9, and are shown below: Paste Waste Baste $ 450,000 43,750 $ 270,000 $ 190,000 130,000 10,000 503,750 400,00 190,000 Income Sales Dividend Rent Interest Total income Expenses Cost of sales General and administrative Interest Income tax Total expenses Profit 300,000 93,000 145,000 29,800 27.000 420,000 $ 83,750 163,000 48,000 10,000 75,000 296.ee $ 104,000 17,000 181,000 9,000 $ V Additional Information Paste purchased its 80% interest in Waste on January 1, Year 4. On this date, Waste had a retained earnings balance of $40,000, and the acquisition differential amounting to $15.000 was allocated entirely to plant, with an estimated remaining life of eight years. The plant is used exclusively for manufacturing goods for resale. Paste purchased its 75% interest in Baste on December 31, Year 6. On this date. Baste had a retained earings balance of $80,000 The acquisition differential amounting to $19.000 was allocated to goodwill; however, because Baste had failed to report adequate profits, the goodwill was entirely written off for consolidated purposes by the end of Year 8 Data Charithar an interamanu oleellhamara sinnenfor safone Additional Information Paste purchased its 80% interest in Waste on January 1, Year 4. On this date, Waste had a retained earnings balance of $40,000, and the acquisition differential amounting to $15,000 was allocated entirely to plant, with an estimated remaining life of eight years The plant is used exclusively for manufacturing goods for resale. Paste purchased its 75% interest in Baste on December 31, Year 6. On this date, Baste had a retained earnings balance of Sa0,000 The acquisition differential amounting to $19,000 was allocated to goodwill, however, because Baste had failed to report adequate profits, the goodwill was entirely written off for consolidated purposes by the end of Year 8. Paste has established a policy that any intercompany sales will be made at a gross profit rate of 30% . On January 1, Year 9, the inventory of Paste contained goods purchased from Waste for $15,000 . During Year 9, the following intercompany sales took place. Paste to Waste Waste to Baste Baste to Paste $ 90,000 178, eee 150,000 On December 31, Year 9, the inventories of each of the three companies contained items purchased on an intercompany basis in the following amounts Paste from easte iste from Paste Saite from Waste $60,000 22,000 60.000 Pra 2. Next Chi On December 31, Year 9, the inventories of each of the three companies contained items purchased on an intercompany basis in the following amounts: Paste from Baste Waste from Paste Baste from Waste $60,000 22,000 60,000 In addition to its merchandising activities, Waste is in the office equipment rental business. Both Paste and Baste rent office equipment from Waste General and administrative expenses for Paste and Baste include rent expense of $25,000 and 314,000 respectively . During Year 6 Waste paid $10,000 interest to Paste for intercompany advances. All of Paste's dividend revenue pertains to its investments in Waste and Baste Retained earnings at December 31, Year 9, for Paste Waste, and Baste were $703,750, $146,000, anle 579,000, respectively Paste Company uses the cost method to account for its investments and uses tax allocation at a rate of 40% when it prepares consolidated financial statements . Required: (a) Prepare a consolidated income statement for Year 9. (Leave no cells blank - be certain to enter "O" wherever required. Input all amounts as positive values. Omit $ sign in your response.) Paste Company Consolidated Income Statement for the Year Ended December 31, Year 9 Sales $450000 Dividends 43750 Interest 10000 Rent 39000 Total income $ 5027501 Cost of sales General and administrative Interest Income tax Total expenses Profit Attributable to: Shareholders of Paste Non-controlling Interests 39000 $502750 Rent Total income Cost of sales General and administrative Interest Income tax Total expenses Profit Attributable to: Shareholders of Paste Non-controlling interests (b) Calculate consolidated retained earnings at December 31, Year 9. (Omit S sign in your response.) Consolidated retained earnings December 31, Year 9 $ (c) Assume that Paste is a private company, uses ASPE, and chooses to use the equity method. Calculate its income from investments for Year 9. (Omit $ sign in your response.) Investment income from subsidiaries S (d) Not available in Connect
