Reference no: EM132462222

The financial statements of Post Corporation and its subsidiary, Sage Company, as at December 31, Year 6, are presented below.

STATEMENTS OF FINANCIAL POSITION December 31, Year 6 Post Sage

Land                                                            $182,000      $26,000

Plant and equipment                                        541,000          72,000

Accumulated depreciation                               (237,000)          (24,000)

Investment in Sage 156,851 - Inventory               34,000           34,000

Notes receivable - 62,000 Accounts receivable       17,900         12,600

Cash                                                              12,900          15,600

                                                                    $707,651       $198,200

Ordinary shares                                                 $100,000        $50,000

Retained earnings                                            266,600           93,000

Notes payable 62,000 - Accounts payable          279,051            55,200

                                                                $707,651          $198,200

STATEMENTS OF PROFIT-Year 6 Post Sage

Sales                                                      $970,000                    $284,000

Management fee revenue                          31,000 - Interest revenue - 7,500

Equity method income from Sage              2,060 - Gain on sale of land - 42,000 1,003,060 333,500

Cost of goods sold                                       610,000                        210,000

Interest expense 20,700 - Other expenses    187,000                         75,500

Income tax expense                                 87,000                          16,000

                                                        (904,700)                       (301,500)

Profit                                                  $98,360                          $32,000

Additional Information

1. Post purchased 70% of the outstanding shares of Sage on January 1, Year 4, at a cost of $112,000. On that date, Sage had accumulated depreciation of $17,000, retained earnings of $22,000, and fair values were equal to carrying amounts for all its net assets, except inventory (overvalued by $19,000).
2. In determining the purchase price, the management of Post noted that Sage, as lessee, leases a warehouse that has terms that are unfavourable relative to market terms. However, the lease agreement explicitly prohibits transfer of the lease (through either sale or sublease). An independent appraiser indicated that the fair value of this unfavourable lease agreement is $25,000. There were five years remaining on this lease on the date of acquisition.
3. The companies sell merchandise to each other at a gross profit rate of 25%.
4. The December 31, Year 5, inventory of Post contained purchases made from Sage amounting to $21,000. There were no intercompany purchases in the inventory of Sage on this date.
5. During Year 6 the following intercompany transactions took place:
6. Sage made a payment of $31,000 to Post for management fees, which was recorded under the category other expenses.
7. Sage made sales of $126,000 to Post. The December 31, Year 6, inventory of Post contained goods purchased from Sage amounting to $34,000.
8. Post made sales of $134,000 to Sage. The December 31, Year 6, inventory of Sage contained goods purchased from Post amounting to $25,000.
9. On July 1, Year 6, Post borrowed $62,000 from Sage and signed a note bearing interest at 12% per annum. The interest on this note was paid on December 31, Year 6.
10. During the year, Sage sold land to Post and recorded a gain of $42,000 on the transaction. This land is being held by Post on December 31, Year 6.
11. Goodwill impairment losses occurred as follows: Year 4, $3,100; Year 5, $620; Year 6, $1,550.
12. Neither Post nor Page paid any dividends during the year.
13. Post uses the equity method to account for its investment in Sage.
14. Both companies pay income tax at 40% on their taxable incomes.

Required:

Question (a) Prepare the following consolidated financial statements for Year 6:

(i) Income statement (Input all values as positive numbers.)

(ii) Statement of financial position (Input all values as positive numbers except accumulated depreciation which should be indicated by a minus sign.)

Question (b) Calculate goodwill impairment loss and profit attributable to non-controlling interest for the year ended December 31, Year 6, under the identifiable net assets method. (Omit $ sign in your response.)

• Goodwill impairment loss - parent company extension method $ NCI - identifiable net assets method $

Question (c) Calculate goodwill and non-controlling interest on the consolidated statement of financial position at December 31, Year 6, under the identifiable net assets method. (Omit $ sign in your response.)

• Goodwill - identifiable net assets method $ NCI - identifiable net assets method $

Question (d) Prepare the consolidated financial statements using the worksheet approach. (Values in the first two columns and last column of the Balance Sheet (the "parent", "subsidiary" and "consolidated" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Entry" columns and Income Statement entry columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Leave no cells blank - be certain to enter "0" wherever required.)