Reference no: EM13333393

Problem

Balance Sheets December 31, 20X3

	GreenTower Ltd.	BlueLoft Ltd.
Assets:
Current assets:
Cash	$  156,000	$  143,000
Accounts receivable	195,000	175,500
Inventory	312,000	253,500
Total current assets	663,000	572,000
Land	923,000	-
Equipment	897,000	1,183,000
Accumulated amortization	(663,000)	(416,000)
Investment in Blue Loft	1,409,200	-
Goodwill*	98,800	__-____
Total assets	3,328,000	1,339,000
Liabilities and shareholders' equity:
Liabilities:
Accounts payable	184,600	78,000
Bonds payable	780,000	260,000
Total liabilities	964,600	338,000
Shareholders' equity:
Common shares	650,000	325,000
Retained earnings	1,713,400	676,000
Total shareholders' equity	2,363,400	1,001,000
Total liabilities and shareholders' equity	$3,328,000	$1,339,000

*from an acquisition prior to Blue Loft

Income Statements

Year Ended December 31, 20X3

	GreenTower Ltd.	BlueLoft Ltd.
Sales revenue	$1,560,000	$1,283,100
Cost of goods sold	1,040,000	845,000
	520,000	438,100
Gain on sale of land	___-___	273,000
	520,000	711,100
Operating expense	305,500	464,100
Net income	214,500	247,000

Statements of Retained Earnings

Year Ended December 31, 20X3

	Green Tower Ltd.	BlueLoft Ltd.
Retained earnings, December 31, 20X2	$1,498,900	$ 429,000
Net income	214,500	247,000
Retained earnings, December 31, 20X3	$1,713,400	$ 676,000

Blue Loft Ltd.

Carrying and Fair Values

January 1, 20X2

	Carrying Value	Fair Value
Cash	$  104,000	$  104,000
Accounts receivable	128,700	128,700
Inventory	231,400	253,500
Land	650,000	811,000
Equipment	390,000	151,000
Accumulated amortization	(260,000)
Accounts payable	91,000	91,000
Bonds payable	260,000	260,000
Common shares	325,000	-
Retained earnings	568,100	-

• On January 1, 20X2, Green Tower Ltd. acquired all  the outstanding common shares of Blue Loft Ltd. for $1,409,200 cash.
• At December 31, 20X2, Green Tower's inventory  included goods that it had purchased from Blue Loft for $58,500. The intercompany profit on these goods  was $15,600. All these goods were  sold to third parties in 20X3.
• During 20X3, Green Tower purchased goods from Blue  Loft for $195,000. Blue Loft earned  a gross profit of $65,000 on this sale.  At December 31, 20X3, Green Tower still had 40% of these goods in  its inventory.
• During 20X3, Green Tower sold goods to Blue Loft  for $507,000. Green Tower earned a gross  profit of $117,000 on this sale. At  December 31, 20X3, Blue Loft still had 20% of these goods in its  inventory.
• In December, 20X3, Blue Loft sold a tract of land  to Green Tower for $923,000. Blue Loft had purchased the land 8 years ago  for $650,000.
• At the time of Green Tower's acquisition, Blue  Loft's equipment had a remaining estimated useful life of 3 years. Blue Loft uses the straight-line method  of amortization, with no residual value.

Required:

Prepare the consolidated financial statements for 20X3 using the direct method.