Problem on balance sheet, Financial Accounting

Assignment Help:

Problem on balance sheet:

At the beginning of 20X2, Dahl Ltd. acquired 8% of the outstanding common shares of Tippy Ltd. for $400,000. This amounted to 80,000 shares. 

At the beginning of 20X4, Dahl acquired an additional 270,000 shares of Tippy for $1,512,000. At this acquisition date, Tippy's shareholders' equity consisted of the following:

          4% non-cumulative preferred shares                     $1,000,000
          Common shares, 1,000,000 outstanding shares      2,400,000
          Retained earnings                                                   2,160,000

At this acquisition date, the fair values of the net identifiable assets equalled their carrying values except for the following:

                                                          Excess of fair value
                                                          over carrying value

                             Inventory                        $  96,000

                             Land                                 800,000

At the beginning of 20X5, Dahl acquired an additional 450,000 shares of Tippy for 2,880,000.  The shares were trading for $6 per share.  At this acquisition date, Tippy's shareholders' equity consisted of the following:


          4% non-cumulative preferred shares                     $1,000,000
          Common shares, 1,000,000 outstanding shares      2,400,000
          Retained earnings                                                   2,560,000

At this acquisition date, the fair values of the net identifiable assets equalled their carrying values except for the following:

                                                          Excess of fair value over/(under)
                                                                   carrying value

                   Accounts receivable                      $W(48,000)
                   Building and equipment (net)            720,000

                   Long-term debt                        160,000

 

The building and equipment have an estimated remaining life of 10 years and the long-term debt matures in 10 years.

The condensed separate-entity financial statements for December 31, 20X6 are as follows:

Balance Sheets

As at December 31, 20X6

 

Dahl Ltd.

Tippy Ltd.

Assets:

 

 

Cash

$      400,000

$    560,000

Accounts receivable

1,920,000

440,000

Inventories

400,000

320,000

Land

4,400,000

800,000

Buildings and equipment (net)

8,488,000

7,200,000

Investment in Tippy (at cost)

4,792,000

____-____

    Total assets

$ 20,400,000

$ 9,320,000

Liabilities:

 

 

Accounts payable

$   2,400,000

$    400,000

Long-term debt

3,200,000

1,600,000

    Total liabilities

5,600,000

2,000,000

Shareholders' equity:

 

 

4% non-cumulative preferred shares

-

 1,000,000

Common shares

7,200,000

2,400,000

Retained earnings

7,600,000

3,920,000

    Total shareholders' equity

14,800,000

7,320,000

Total liabilities and shareholders' equity

$ 20,400,000

$ 9,320,000

Income Statements

Year Ended December 31, 20X6

 

 

Dahl Ltd.

Tippy Ltd.

Sales

$ 12,000,000

$ 7,200,000

Dividend income

96,000

-

Gain on sale of equipment

_______

168,000

   Total revenue

12,096,000

7,368,000

Cost of goods sold

7,600,000

4,960,000

Operating expenses

2,374,400

944,000

Income tax expense

825,600

584,000

   Total expenses

10,800,000

6,488,000

Net income

1,296,000

$    880,000

 

Additional information:

  • Dahl and Tippy declared and paid dividends during 20X6 of $400,000 and $160,000, respectively.
  • At the end of 20X5, the inventories of Dahl and Tippy included goods with intercompany profits of $68,000 and $152,000 respectively.
  • During 20X6, Dahl sold goods to Tippy for $3,120,000 at a gross margin of 45%.  At the end of 20X6, $200,000 of these goods were still in Tippy's inventory.
  • During 20X6, Tippy sold goods to Dahl for $2,080,000 at a gross margin of 35%.  At the end of the year, $320,000 of these goods were still in Dahl's inventory.
  • On December 30, 20X6, Tippy sold some equipment to Dahl for $360,000.  At that time, the equipment had a book value of $192,000 and an estimated remaining life of 8 years.  Dahl has paid Tippy $252,000 and will pay the balance on January 31, 20X7.
  • Both Dahl and Tippy use the straight-line method of amortization for their buildings and equipment.
  • In 20X5, a goodwill impairment of $73,600 was recognized and a further impairment of $46,400 occurred in 20X6.  Impairment losses are allocated 80% to Dahl and 20% to the non-controlling interest.
  • Both companies are taxed at an average rate of 40%.

 


Related Discussions:- Problem on balance sheet

Concepts in accounting, Mr. Inherits 30000. Decides to open a salon jj salo...

Mr. Inherits 30000. Decides to open a salon jj salon. On 1/4/2016 commits 10000 to the business Opens an a/c in the bank What will be the money under capital in his books on 1/4/10

Goods at branch marked down, GOODS AT BRANCH MARKED DOWN, OR MARKED UP BY A...

GOODS AT BRANCH MARKED DOWN, OR MARKED UP BY AN ADDITIONAL AMOUNT If goods at the branch are not selling well, branch could be authorized by the Head office to mark-down the good

Recording and reporting Equity, Ask qCamp Corp had the following balances i...

Ask qCamp Corp had the following balances in its stockholders'''' equity at jan 1: Common stock, $2, par value, 450,000 shares issued $900,000 Additional pd in capial 1,200,000 Ret

Example on differential cash flows, Q. Example on Differential cash flows? ...

Q. Example on Differential cash flows? Differential cash flows: contracting out versus in-house provision NET PRESENT VALUE =£45519 The positive NPV signifies th

Explain final location survey, Q. Explain Final Location Survey? A fina...

Q. Explain Final Location Survey? A final Location Survey is under taken on the completion of traffic survey to select the final rout of the line to be constructed, taking into

According to the management perspective cost , Cost: - According to the ma...

Cost: - According to the management perspective cost is define as a reduction in the value of assets for to secure benefit or gain. In other words cost is the different expenses

Illustrate management of commercial and political risk, Q. Illustrate Manag...

Q. Illustrate Management of commercial and political risk? Commercial risk comprises both the physical risk that goods in transit may be lost stolen or destroyed as well as the

Accounting standard, redemption of debentures by sinking fund method

redemption of debentures by sinking fund method

Non-for-profit organization, Non-for-Profit Organization/Tax-Exempt Organiz...

Non-for-Profit Organization/Tax-Exempt Organization - An incorporated organization that exists for charitable or educational purposes, and from that its shareholders or trustees do

Tracing trust property-breach of law-trusts laws , Tracing trust property ...

Tracing trust property   Apart from suing the trustee, in the event of a breach of trust, the beneficiary may follow the trust property and recover it from third parties, or the p

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd