Reference no: EM133139029
Question - ILT Corp. owns 75% of the common shares of CAG Inc. ILT uses the cost method to account for its investment in CAG. The companies' financial statements for the year ended December 31, 2020, follow:
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Statements of financial position As at December 31, 2020
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Assets
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ILT
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CAG
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Cash
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$145,000
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$40,000
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Accounts receivable and accruals
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450,000
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360,000
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Inventory
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625,000
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380,000
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Loan receivable
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315,000
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0
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Property, plant and equipment - net
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1,975,000
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480,000
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Investment in CAG
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160,000
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0
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$3,670,000
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$1,260,000
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Liabilities and shareholders' equity
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|
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Accounts payable and accruals
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$325,000
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$180,000
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Long-term debt
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1,050,000
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750,000
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Common shares
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250,000
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100,000
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Retained earnings
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2,045,000
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230,000
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$3,670,000
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$1,260,000
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Statements of comprehensive income Year ended December 31, 2020
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ILT
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CAG
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Sales and other income
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$4,250,000
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$2,450,000
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Cost of sales
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2,635,000
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1,755,000
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Gross margin
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1,615,000
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695,000
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Depreciation expense
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225,000
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125,000
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Other expenses
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460,000
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235,000
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Income tax expense
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300,000
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180,000
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Net income
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$630,000
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$155,000
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Additional information:
1. At the time of acquisition, the fair values of CAG's identifiable assets equaled book values and there was no goodwill associated with the acquisition.
2. CAG sold $180,000 of inventory to ILT during the year on 30-day trade terms. At year end CAG's account receivable from ILT was $25,000. ILT resold the inventory to a third party in 2020.
3. CAG borrowed $129,000 from ILT in March 2020, payable in full on July 31, 2024. Interest charges for the year totalled $10,000 of which $8,000 remained payable at year end.
4. ILT charges CAG $12,000 for the year in management fees. At December 31, 2020, the management fees for December remained unpaid.
Required -
a) Prepare consolidated statement of comprehensive income for the year ended December 31, 2020.
b) Calculate the following consolidated statement of financial position account balances as at December 31, 2020:
i. Accounts receivable and accruals
ii. Loan receivable
iii. Accounts payable and accruals
iv. Long-term debt