Parent purchased 75% of the voting shares of Sub for $525,000 on January 1, 20X1. On that date, Sub's Common Stock and Retained Earnings had a book
value of $200,000 and $100,000 respectively.
Sub's fair values approximated its carrying values with the following exceptions:
- Warehouse had a fair value $30,000 higher than carrying value, (10 years remaining)
- Equipment had a fair value $50,000 lower than carrying value (8 years remaining)
The Financial Statements of both companies for the Year ended December 31, 20x1 areshown below:
Income Statements Parent Sub
Sales $500,000 $400,000
Other Revenues $100,000 $60,000
Cost of Goods Sold $(400,000) $(320,000)
Depreciation Expense $(20,000) $(10,000)
Other Expenses $(60,000) $(30,000)
Income Tax Expense $(48,000) $(40,000)
Net Income $72,000 $60,000
Statement of Retained Earnings
Retained Earnings, December 31, 20x9 $200,000 $240,000
Dividends $(22,000) $(30,000)
Balance, December 31, 20x10 $250,000 $270,000
Balance Sheet
Cash $150,000 $120,000
Warehouse $25,000 $160,000
Inventory $200,000 $180,000
Investment in YANG Inc. $525,000 ------
Land $40,000
Equipment (net) $360,000 $240,000
$1,600,000 $700,000
Current Liabilities $600,000 $130,000
Bonds Payable $250,000 $100,000
Common Shares $500,000 $200,000
Retained Earnings $250,000 $270,000
$1,600,000 $700,000
Additional Information:
Part A
During Year 1 Sub sold inventory to Parent for $90,000. At the year-end 25% of the inventory is remained.
During Year 1 Parent sold inventory to Sub for $60,000. At the year-end 25% of the inventory is remained.
No Goodwill impairment.
Prepare:
Calculate Goodwill
Non-controlling interest
Consolidated Balance Sheet, Income Statement and Retained Earnings at December 31, 20X1
Part B
Use the same data from statements for Year 2
Last year ending inventory for Parent and Sub both sold in Year2
During Year 2 Sub sold inventory to Parent for $90,000. At the year-end 50% of the inventory is remained.
During Year 2 Parent sold inventory to Sub for $60,000. At the year-end 50% of the inventory is remained.
Prepare:
Consolidated Balance Sheet, Income Statement and Retained Earnings at December 31, 20X2
Changes in Non-controlling interest-Year 2