urgently required

x 17 G - B D E F H J 1 2 3 4 On March 1st 2020, Pinnacle made an offer to acquire 100% of the common shares of Sushi Ltd. 5 Pinnacle was unsuccessful to acquire 100% but was able to acquire 85% of the common shares Sushi Ltd. 6 for $11,050,000. The transaction was to close on March 31st, 2020. Sushi's closing balance sheet at 7 March 31, 2020 is as follows: 8 9 10 Balance Sheet at March 31, 2020 11 Sushi Ltd. 12 Book Value FMV 13 Cash 340,000 340,000 14 A/R 1,300,000 1,200,000 15 Inventory 1,700,000 1,650,000 16 PPE 4,000,000 6,000,000 17 Trademark 2,000,000 18 7,340,000 11,190,000 19 20 A/P 700,000 700,000 21 Acc Liab. 1,200,000 1,400,000 22 Common Shares 1,000,000 23 Retained Earnings 4,440,000 24 7,340,000 25 26 A/R, Inventory, A/P all turnover in 2020. PPE had a remaining life of 10 years. Midterm Part I Solution Part II Solution Sheet2 1 A B C D E F G H K L M 24 7,340,000 25 26 A/R, Inventory, A/P all turnover in 2020. PPE had a remaining life of 10 years. 27 The accrued liabilities would amortize over 3 years. The trademark has a useful life of 20 years. 28 29 Other Information: 30 31 Shiraz Chirania was the Controller of Pinnacle and understood that the Equity Method to account for the acquisition was the preferred method, 32 but he felt it would be to difficult and as Pinnacle was using ASPE as its accounting framework he elected to record the investment using the 33 cost method. 34 35 Both Companies have a December 31st year and and a tax rate of 20% 36 37 At December 31, 2023 Pinnacle performed a Goodwill impairment test from the acquisition of Sushi and determined the Goodwill 38 was overstated by 10%. 2023 was the first year the Goodwill from acquisition was ever impaired. Shiraz blames this on COVID-22. 39 40 Shiraz was confused how to account for intercompany transactions upon consolidation and noted the following intercompany transactions 41 In 2023, Sushi sold inventory to Pinnacle for $60,000. At year end, Pinnacle had half the inventory remaining. Sushi sells all inventory 43 to Pinnacle at a 30% gross profit margin 45 in 2022, Pinnacle sold inventory to Sushi for $30,000. At the 2022 year-end, Sushi had all the inventory it purchased from Pinnacle. 46 Pinnacle realizes a 40% gross profit margin on its sales. 48 in 2021, Pinnacle sold a small parcel of Agriculture and to Sushi and realized again of $60,000. At the end of 2022, Sushi continues 49. to use the land and has accounted for it in PPE. Midterm Part 1 Solution Part Il Solution Sheet2 E F G H 49 to use the land and has accounted for it in PPE. 50 51 The financial statements of both companies at December 31, 2023 are presented below: 2 53 Income Statement Pinnacle Sushi 54 Sales $ 7,300,000 $1,450,000 55 COGS 3,138,750 942,500 56 Gross Margin 4,161,250 507,500 67 58 Dividend Income 100,000 59 TOTAL REVENUE 4,261,250 507,500 0 1 Amortization - trademark 75,000 -2 Depreciation 126,250 305,000 3 General & Admin 350,000 60,000 4 551,250 365,000 5 Inc tax expense 200,000 30,000 6 7 Net Income $ 3,510,000 $ 112,500 Retained Earnings Opening Retained Earnings 1 Net Income Dividends 3 Ending Retained Earnings Pinnacle $ 4,135,000 3,510,000 (200,000) $ 7,445,000 Sushi $5,237,500 112,500 (100,000) $5,250,000 F K L A B D E G H U 71 Net Income 3,510,000 112,500 72 Dividends (200,000) (100,000) 73 Ending Retained Earnings $ 7,445,000 $5,250,000 74 75 Balance Sheet - Dec 31, 2023 Pinnacle Sushi 76 77 Cash $ 660,000 $1,590,000 78 A/R 710,000 1,005,000 79 Inventory 725,000 685,000 80 PPE 975,000 3,500,000 81 Trademark 830,000 82 Investment in Sushi 11,050,000 83 $ 14,950,000 $6,780,000 84 85 A/P $ 305,000 $ 380,000 86 Acc Liab. 2,200,000 150,000 87 Common Shares 5,00 1,000,000 88 Retained Earnings 7,445,000 5,250,000 89 $ 14,950,000 $6,780,000 90 91 Required: 92 93 Part I: Prepare Consolidated Financial Statements for Pinnacle for the year ended December 31 2023 (40 marks) 94 95 Part 11: Prepare Equity Method Journal Entries (5 marks) 96 Midterm Part I Solution Part Il Solution Sheet2 x 17 G - B D E F H J 1 2 3 4 On March 1st 2020, Pinnacle made an offer to acquire 100% of the common shares of Sushi Ltd. 5 Pinnacle was unsuccessful to acquire 100% but was able to acquire 85% of the common shares Sushi Ltd. 6 for $11,050,000. The transaction was to close on March 31st, 2020. Sushi's closing balance sheet at 7 March 31, 2020 is as follows: 8 9 10 Balance Sheet at March 31, 2020 11 Sushi Ltd. 12 Book Value FMV 13 Cash 340,000 340,000 14 A/R 1,300,000 1,200,000 15 Inventory 1,700,000 1,650,000 16 PPE 4,000,000 6,000,000 17 Trademark 2,000,000 18 7,340,000 11,190,000 19 20 A/P 700,000 700,000 21 Acc Liab. 1,200,000 1,400,000 22 Common Shares 1,000,000 23 Retained Earnings 4,440,000 24 7,340,000 25 26 A/R, Inventory, A/P all turnover in 2020. PPE had a remaining life of 10 years. Midterm Part I Solution Part II Solution Sheet2 1 A B C D E F G H K L M 24 7,340,000 25 26 A/R, Inventory, A/P all turnover in 2020. PPE had a remaining life of 10 years. 27 The accrued liabilities would amortize over 3 years. The trademark has a useful life of 20 years. 28 29 Other Information: 30 31 Shiraz Chirania was the Controller of Pinnacle and understood that the Equity Method to account for the acquisition was the preferred method, 32 but he felt it would be to difficult and as Pinnacle was using ASPE as its accounting framework he elected to record the investment using the 33 cost method. 34 35 Both Companies have a December 31st year and and a tax rate of 20% 36 37 At December 31, 2023 Pinnacle performed a Goodwill impairment test from the acquisition of Sushi and determined the Goodwill 38 was overstated by 10%. 2023 was the first year the Goodwill from acquisition was ever impaired. Shiraz blames this on COVID-22. 39 40 Shiraz was confused how to account for intercompany transactions upon consolidation and noted the following intercompany transactions 41 In 2023, Sushi sold inventory to Pinnacle for $60,000. At year end, Pinnacle had half the inventory remaining. Sushi sells all inventory 43 to Pinnacle at a 30% gross profit margin 45 in 2022, Pinnacle sold inventory to Sushi for $30,000. At the 2022 year-end, Sushi had all the inventory it purchased from Pinnacle. 46 Pinnacle realizes a 40% gross profit margin on its sales. 48 in 2021, Pinnacle sold a small parcel of Agriculture and to Sushi and realized again of $60,000. At the end of 2022, Sushi continues 49. to use the land and has accounted for it in PPE. Midterm Part 1 Solution Part Il Solution Sheet2 E F G H 49 to use the land and has accounted for it in PPE. 50 51 The financial statements of both companies at December 31, 2023 are presented below: 2 53 Income Statement Pinnacle Sushi 54 Sales $ 7,300,000 $1,450,000 55 COGS 3,138,750 942,500 56 Gross Margin 4,161,250 507,500 67 58 Dividend Income 100,000 59 TOTAL REVENUE 4,261,250 507,500 0 1 Amortization - trademark 75,000 -2 Depreciation 126,250 305,000 3 General & Admin 350,000 60,000 4 551,250 365,000 5 Inc tax expense 200,000 30,000 6 7 Net Income $ 3,510,000 $ 112,500 Retained Earnings Opening Retained Earnings 1 Net Income Dividends 3 Ending Retained Earnings Pinnacle $ 4,135,000 3,510,000 (200,000) $ 7,445,000 Sushi $5,237,500 112,500 (100,000) $5,250,000 F K L A B D E G H U 71 Net Income 3,510,000 112,500 72 Dividends (200,000) (100,000) 73 Ending Retained Earnings $ 7,445,000 $5,250,000 74 75 Balance Sheet - Dec 31, 2023 Pinnacle Sushi 76 77 Cash $ 660,000 $1,590,000 78 A/R 710,000 1,005,000 79 Inventory 725,000 685,000 80 PPE 975,000 3,500,000 81 Trademark 830,000 82 Investment in Sushi 11,050,000 83 $ 14,950,000 $6,780,000 84 85 A/P $ 305,000 $ 380,000 86 Acc Liab. 2,200,000 150,000 87 Common Shares 5,00 1,000,000 88 Retained Earnings 7,445,000 5,250,000 89 $ 14,950,000 $6,780,000 90 91 Required: 92 93 Part I: Prepare Consolidated Financial Statements for Pinnacle for the year ended December 31 2023 (40 marks) 94 95 Part 11: Prepare Equity Method Journal Entries (5 marks) 96 Midterm Part I Solution Part Il Solution Sheet2