Reference no: EM132793305
Problem - On January 1, Year 4, Grant Corporation bought 12,000 (80%) of the outstanding common shares of Lee Company for $105,000 cash. Lee's shares were trading for $7 per share on the date of acquisition. On that date, Lee had $37,500 of common shares outstanding and $45,000 retained earnings. Also on that date, the carrying amount of each of Lee's identifiable assets and liabilities was equal to its fair value except for the following:
|
Carrying Amount
|
Fair Value
|
Inventory
|
$75,000
|
$82,500
|
Patent
|
15,000
|
30,000
|
The patent had an estimated useful life of five years at January 1, Year 4, and the entire inventory was sold during Year 4. Grant uses the cost method to account for its investment.
The following are the separate-entity financial statements of Grant and Lee as at December 31, Year 7:
BALANCE SHEETS At December 31, Year 7
|
|
Grant
|
Lee
|
Assets
|
|
|
Cash
|
$7,500
|
$27,000
|
Accounts receivable
|
277,500
|
123,000
|
Inventory
|
465,000
|
150,000
|
Investment in Lee
|
105,000
|
|
Equipment, net
|
345,000
|
307,500
|
Patent, net
|
|
3,000
|
|
$1,200,000
|
$610,500
|
Liabilities and Shareholders' Equity
|
|
|
Accounts payable
|
$285,000
|
$292,500
|
Other accrued liabilities
|
90,000
|
75,000
|
Income taxes payable
|
120,000
|
108,000
|
Common shares
|
255, 000
|
37,500
|
Retained earnings
|
450,000
|
97,500
|
|
$1,200,000
|
$610,500
|
Additional Information:
The recoverable amount for goodwill was determined to be $15,000 on December 31, Year 7. The goodwill impairment loss occurred in Year 7.
Corner's accounts receivable contains $45,000 owing from Brook.
Amortization expense is grouped with distribution expenses and impairment losses are grouped with other expenses.
Required -
(a) Calculate consolidated retained earnings at December 31, Year 7.
(b) Prepare consolidated financial statements (Income Statement & Balance Sheet) for Year 7.
Is mike under any delusion
: Mike Barr was an outstanding, Mike sees no reason why he should have to pay state income tax on his player's salary. Is Mike under any delusions? Explain.
|
Do requirements support the assertion that auditors audit
: How it is identified, measured, classified, and reported. Do these requirements support the assertion that auditors audit around the computer?
|
Explain the syntax of commands you use
: Investigate your selected tool and explain the syntax of commands you use. Your presentation must include at least 6 screenshots that demonstrate
|
Explain the purpose of mills distinction
: Question 1: What is the purpose of Mills distinction between a "living belief" and a "dead dogma"?
|
Calculate consolidated retained earnings at December
: Corner's accounts receivable contains $45,000 owing from Brook. Calculate consolidated retained earnings at December 31, Year 7
|
What is the maximum amount can give to the family
: What is the maximum amount they can give to their family (including the sons- and daughters-in-law) without using any of their unified transfer tax credit?
|
Prepare bank reconciliation for entity
: Prepare bank reconciliation. The disbursement per books are overstated by 45,000. The cash balance per book is 280,000, while cash balance per bank statement.
|
Assignment on leisure and self-development
: In what ways does your own personal leisure lead to personal and social development and life-long education, how and why? On the other hand
|
Question on consumption of meat and use of leather
: Are you less likely to buy leather and fur products, or not? Why or why not?
|