Reference no: EM132953751
Craft Ltd. held 80% of the outstanding ordinary shares of Delta Corp. as at December 31, Year 12. In order to establish a closer relationship with Nonaffiliated Corporation, a major supplier to both Craft and Delta, all three companies agreed that Nonaffiliated would take an equity position in Delta. Accordingly, for a cash payment of $13.80 per share, Delta issued 12,250 additional ordinary shares to Nonaffiliated on December 31, Year 12. This was the last transaction that occurred on this date.
Statements of financial position for the two companies just prior to this transaction were as follows:
CRAFT LTD.
STATEMENT OF FINANCIAL POSITION
at December 31, Year 12
Buildings and equipment (net) $ 748,000
Investment in Delta 442,960
Inventory 188,500
Accounts receivable 114,000
Cash 83,500
$ 1,576,960
Ordinary shares $ 480,000
Retained earnings 634,000
Mortgage payable 303,000
Accounts payable 159,960
$ 1,576,960
DELTA CORP.
STATEMENT OF FINANCIAL POSITION
at December 31, Year 12
Buildings and equipment (net) $ 588,000
Inventory 219,000
Accounts receivable 173,600
Cash 69,200
$ 1,049,800
Ordinary shares (Note 1) $ 250,000
Retained earnings 285,575
Accrued liabilities 110,000
Accounts payable 404,225
$1,049,800
Note 1: 49,000 ordinary shares are outstanding on December 31, Year 12.
Additional Information
- Craft has used the equity method of accounting for its investment in Delta since it acquired its 80% interest in Delta in Year 2. At that time, the acquisition differential was entirely allocated to inventory and patent, which still exists but is not recorded on Delta's separate-entity books.
- There were no unrealized intercompany asset profits as at December 31, Year 12.
Required:
Problem (a) Create a consolidated statement of financial position as at December 31, Year 12.