Reference no: EM133059492

Question - Brand X Inc. purchased an 80% interest in Brand Y Inc. for $350,000 on January 1, 2001. On that date, Brand Y Inc had common stock and retained earnings worth $180,000 and $20,000, respectively. Goodwill is tested annually for impairment. At the date of acquisition, Brand Y's assets and liabilities were assessed for fair value as follows:

Inventory $5,000 less than book value

Equipment $30,000 less than book value

Patent $24,000 greater than fair value

Bonds Payable $5,000 less than book value

The Balance Sheets of both Companies, as at December 31, 2001 are disclosed below:

	Brand X Inc	Brand Y Inc
Cash	$200,000	$45,000
Accounts Receivable	$100,000	$40,000
Inventory	$80,000	$55,000
Equipment (net)	$220,000	$100,000
Patent	-	$60,000
Investment in Brand Y	$348,000
Total Assets	$948,000	$300,000
Current Liabilities	$480,000	$53,000
Bonds Payable	$270,000	$50,000
Common Shares	$100,000	$180,000
Retained Earnings	$98,000	$17,000
Total Liabilities and Equity	$948,000	$300,000

The net incomes for Brand X and Brand Y for the year ended December 31, 2001 were $1,000 and $48,000 respectively. An impairment test conducted on December 31, 2001 revealed that the Goodwill should actually have a value $2,000 lower than the amount computed on the date of acquisition. Both companies use a FIFO system, and Brand Y's inventory on the date of acquisition was sold during the year. Brand X did not declare any dividends during the year. However, Brand Y paid $51,000 in dividends to make up for several years in which the company had never paid any dividends. Brand Y's equipment and patent have useful lives of 10 years and 6 years respectively from the date of acquisition. All bonds payable mature on January 1, 2006. On July 1, 2001 Brand Y sold a depreciable asset to Brand X and recorded a loss on the sale of $20,000. On July 1, 2001 the depreciable assets had a remaining useful life of 10 years.

Required - Prepare Brand X's Consolidated Balance Sheet as at December 31, 2001.