Reference no: EM133433624

Question is from McGraw-Hill Connect

Hey tutors of course hero. This question has been taken down now twice because of missing information. I can for sure say that this is all the information the on the question and there is no other information provided. Thanks! I am unsure if you are able to see the images but I attached images of what is being asked at the bottom of the question. 

please comment if there is anything I can do to help solve the question but I am very stuck on this question.

On January 2, Year Poplar Ltd. purchased 80 % of the outstanding shares of Spruce Ltd. for $ 2,040,000 At that date, Spruce had common shares of $ 500,000 and retained earnings of $ 1,290,000 and accumulated depreciation of $ 640,000. Poplar acquired the Spruce shares to obtain control of mineral rights owned by Spruce. At the date of acquisition, these mineral rights were valued at $760,000, were not recognized on Spruce's separate-entity balance sheet, and had an useful life of 10 years. Except for the mineral rights, the carrying amount of the recorded assets and liabilities of Spruce were equal to their fair values. On December 31, Year 7, the trial balances of the two companies were as follows :

	Poplar	Spruce
Cash	1,040,000	504,000
Accounts receivable	2,080,000	398,000
Inventory	3,120,00	2,046,000
Plant and equipment	14,560,000	2,940,000
Investment in Spruce (cost)	2,040,000	-
Investment in bonds	-	242,000
Cost of goods sold	2,440,000	856,800
Other expenses	971,000	304,000
Interest expense	37,000	-
Income tax expense	663,200	390,000
Dividends	600,000	250,000
	$ 27,551,200	$ 7,930,800
Accounts Payable	2,528,000	2,518,500
Accumulated depreciation: plant and equipment	4,064,400	1,040,000
Bonds payable	500,000	-
Premium on bonds payable	12,000	-
Common shares	4,500,000	500,000
Retained earnings, January 1	10,806,800	1,806,800
Sales	4,940,000	2,043,500
Dividend revenue	200,000	-
Interest revenue	-	22,000
	$ 27,551,200	$ 7,930,800

Additional Information

• The Year 7 net incomes of the two companies are as follows:

Poplar Ltd.	1,028,800
Spruce Ltd.	514,700

• The mineral rights owned by Spruce have increased in value since the date of acquisition and were worth $ 928,600 at December 31, Year 7
• On January 2, Year 5, Poplar sold equipment to Spruce for $ 540,000. The equipment had a carrying amount of $ 432,000 at the time of the sale. The remaining useful life of the equipment was 5 years.
• The Year 7 opening inventories of Poplar contained $ 504,000 of merchandise purchased from Spruce during Year 6. Spruce had recorded a gross profit of $ 201,600 on this merchandise.
• During Year 7 Spruce's sales to Poplar totalled $ 1,004,000. These sales were made at a gross profit rate of 35 %
• Poplar's ending inventory contains $ 304,000 of merchandise purchased from Spruce.
• On January 2, Year 5, Poplar issued 8 %, 7-year bonds with a face value of $ 500,000 for $ 521,000. Interest is paid annually on December 31. On January 2, Year 6, Spruce purchased one-half of this issue on the open market at a cost of $ 238,000.
• Other expenses include depreciation expense.
• Tax allocation will be at a rate of 40%.