Reference no: EM13333413
Problem
Income Statements
Year Ended December 31, 20X8
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Insure Co.
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Go-med Co.
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Sales
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$3,900,000
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$1,560,000
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Other income
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260,000
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91,000
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Gain on sale of land
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___-___
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130,000
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4,160,000
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1,781,000
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Cost of sales
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1,820,000
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728,000
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Operating expenses
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780,000
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559,000
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Income tax
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520,000
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195,000
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3,120,000
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1,482,000
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Net income
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$1,040,000
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$ 299,000
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Insure acquired 40% of the common shares of Go-med in 20X2 for $1,072,500.
For 20X8, Insure amortized its acquisition differential as follows:
Buildings $ 11,700
Long-term liabilities (16,250)
Goodwill impairment loss 16,900
$ 12,350
During 20X8, Go-med paid royalties of $162,500 to Insure, which Insure included in its other income.
During 20X8, Go-med sold land to a third party. It had acquired the land 3 years ago from Insure. At that time, Insure had recorded a profit on the sale of $29,250.
During 20X8, Go-med declared and paid dividends of $104,000.
Both Insure and Go-med pay taxes at an average rate of 40%.
Required:
Assume that Go-med is a joint venture owned by Insure and four other venturers, that the acquisition differentials are valid, and that it has not yet adopted IFRS 11: Joint Arrangements. Prepare a 20X8 consolidated income statement for Insure using proportionate consolidation.