Reference no: EM133066101

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:

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.