Reference no: EM133155450

Question - Pal Co. owns 80% of the common shares of Sal Ltd. When Pal acquired Sal in 20X0, all of the acquisition differential was allocated to goodwill. There was no impairment of goodwill in 20X9. The following data was extracted from the financial records of the two companies as at December 31, 20X9:

Pal Sal

Inventory $600,000 $500,000

Equipment - net 1,400,000 1,200,000

Cost of goods sold 4,800,000 4,100,000

Depreciation expense 200,000 180,000

Income tax expense 1,000,000 1,330,000

Net income 1,500,000 2,000,000

Additional information:

1. On January 2, 20X6, Pal sold equipment to Sal for $264,000. Pal paid $400,000 for this equipment on January 1, 20X2, and had been depreciating the equipment on a straight-line basis over 10 years with no residual value. There has been no change in the estimated useful life of this equipment or its residual value.

2. During 20X8, Sal sold merchandise to Pal for $200,000. Of this merchandise, Pal resold 30% in 20X8 and the other 70% in 20X9. Sal earned a gross margin of 45% on its sales to Pal.

3. During 20X9, Sal sold merchandise to Pal for $220,000. Of this merchandise, Pal resold 20% in 20X9 and the other 80% in 20X0. Sal earned a gross margin of 45% on its sales to Pal.

4. During 20X9, Sal declared dividends of $600,000 and Pal declared dividends of $400,000.

5. Both companies pay income tax at a rate of 40%.

Required - Based solely on the information provided, calculate the balances in the following accounts on the consolidated financial statements for 20X9:

i. Inventory

ii. Equipment - net

iii. Cost of goods sold

iv. Depreciation expense

v. Income tax expense

vi. Net income attributable to non-controlling interests

vii. Net income attributable to the equity shareholders of Pal