Sub common stock and retained earnings

Reference no: EM13972810

Parent purchased 75% of the voting shares of Sub for $525,000 on January 1, 20X1. On that date, Sub's Common Stock and Retained Earnings had a book

value of $200,000 and $100,000 respectively.

Sub's fair values approximated its carrying values with the following exceptions:

Warehouse had a fair value $30,000 higher than carrying value, (10 years remaining)
Equipment had a fair value $50,000 lower than carrying value (8 years remaining)

The Financial Statements of both companies for the Year ended December 31, 20x1 areshown below:

Income Statements Parent Sub

Sales $500,000 $400,000

Other Revenues $100,000 $60,000

Cost of Goods Sold $(400,000) $(320,000)

Depreciation Expense $(20,000) $(10,000)

Other Expenses $(60,000) $(30,000)

Income Tax Expense $(48,000) $(40,000)

Net Income $72,000 $60,000

Statement of Retained Earnings

Retained Earnings, December 31, 20x9 $200,000 $240,000

Dividends $(22,000) $(30,000)

Balance, December 31, 20x10 $250,000 $270,000

Balance Sheet

Cash $150,000 $120,000

Warehouse $25,000 $160,000

Inventory $200,000 $180,000

Investment in YANG Inc. $525,000 ------

Land $40,000

Equipment (net) $360,000 $240,000

$1,600,000 $700,000

Current Liabilities $600,000 $130,000

Bonds Payable $250,000 $100,000

Common Shares $500,000 $200,000

Retained Earnings $250,000 $270,000

$1,600,000 $700,000

Additional Information:

Part A

During Year 1 Sub sold inventory to Parent for $90,000. At the year-end 25% of the inventory is remained.

During Year 1 Parent sold inventory to Sub for $60,000. At the year-end 25% of the inventory is remained.

No Goodwill impairment.

Prepare:

Calculate Goodwill

Non-controlling interest

Consolidated Balance Sheet, Income Statement and Retained Earnings at December 31, 20X1

Part B

Use the same data from statements for Year 2

Last year ending inventory for Parent and Sub both sold in Year2

During Year 2 Sub sold inventory to Parent for $90,000. At the year-end 50% of the inventory is remained.

During Year 2 Parent sold inventory to Sub for $60,000. At the year-end 50% of the inventory is remained.

Prepare:

Consolidated Balance Sheet, Income Statement and Retained Earnings at December 31, 20X2

Changes in Non-controlling interest-Year 2

Reference no: EM13972810

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