amount of goodwill at the acquisition date. Part B Determine the following numbers from the consolidated income statement for the year ending December 31, Year 11 Sales Dividend, investment income, and gains Cost of goods sold Other expenses Income tax expense

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Part A

  • Determine the amount of goodwill at the acquisition date.

Part B

Determine the following numbers from the consolidated income statement for the year ending December 31, Year 11

  • Sales
  • Dividend, investment income, and gains
  • Cost of goods sold
  • Other expenses
  • Income tax expense
  • Profit
  • Non-controlling interest

Part C

  • Calculate the consolidated retained earnings at December 31, Year 11. The consolidated retained earnings is

Part D

Determine the following numbers from the consolidated balance sheet at December 31, Year 11

  • Cash and current receivables
  • Inventories
  • Deferred income tax asset
  • Goodwill
  • Plant and equipment
  • Accumulated depreciation
  • Land
  • Current liabilities
  • Deferred tax liability
  • Long-term liabilities
  • Ordinary shares
  • Non-controlling interest
INCOME STATEMENTS
For year ending December 31, Year 11
(in thousands of dollars)
Vine
Devine
$ 13,600
2,400
$ 4,300
3,000
7,300
2,800
Sales
Dividends, investment income, and gains
Total income
Cost of goods sold
Other expenses
16,000
11,000
500
500
Income taxes
200
200
3,500
$ 3,800
Total expenses
11,700
$ 4,300
Profit
STATEMENTS OF FINANCIAL POSITION
December 31, Year 11
(in thousands of dollars)
Vine
Devine
$ 3,700
1,000
$ 2,220
2,800
4,920
17,000
(7,600)
6,000
$ 25,340
Cash and current receivables
Inventories
Investment in Devine, cost
Plant and equipment
Accumulated depreciation
Land
10,000
(6,800)
2,500
$ 10,400
Total assets
$ 740
3,000
1,200
10,000
10,400
$ 25,340
$ 120
100
Current liabilities
Deferred income taxes
Long-term liabilities
Ordinary shares
Retained earnings
Total equity and liabilities
500
3,580
6,100
$ 10,400
Transcribed Image Text:INCOME STATEMENTS For year ending December 31, Year 11 (in thousands of dollars) Vine Devine $ 13,600 2,400 $ 4,300 3,000 7,300 2,800 Sales Dividends, investment income, and gains Total income Cost of goods sold Other expenses 16,000 11,000 500 500 Income taxes 200 200 3,500 $ 3,800 Total expenses 11,700 $ 4,300 Profit STATEMENTS OF FINANCIAL POSITION December 31, Year 11 (in thousands of dollars) Vine Devine $ 3,700 1,000 $ 2,220 2,800 4,920 17,000 (7,600) 6,000 $ 25,340 Cash and current receivables Inventories Investment in Devine, cost Plant and equipment Accumulated depreciation Land 10,000 (6,800) 2,500 $ 10,400 Total assets $ 740 3,000 1,200 10,000 10,400 $ 25,340 $ 120 100 Current liabilities Deferred income taxes Long-term liabilities Ordinary shares Retained earnings Total equity and liabilities 500 3,580 6,100 $ 10,400
On January 1, Year 7, the Vine Company purchased 60,000 of the 80,000 ordinary shares of the Devine Company for $80 per share. On that date, Devine had ordinary shares
of $3,580,000, and retained earnings of $2,020,000. When acquired, Devine had inventories with fair values $100,000 less than carrying amount, a parcel of land with a fair
value $120,000 greater than the carrying amount, and equipment with a fair value $200,000 less than carrying amount. There were also internally generated patents with an
estimated market value of $450,000 and a five-year remaining life. A long-term liability had a market value $150,000 greater than carrying amount; this liability was paid off
December 31, Year 10. All other identifiable assets and liabilities of Devine had fair values equal to their carrying amounts. Devine's accumulated depreciation on the plant
and equipment was $420,000 at the date of acquisition.
At the acquisition date, the equipment had an expected remaining useful life of ten years. Both companies use the straight-line method for all depreciation and amortization
calculations and the FIFO inventory cost flow assumption. Assume a 40% income tax rate on all applicable items and that there were no impairment losses for goodwill.
On September 1, Year 11, Devine sold a parcel of land to Vine and recorded a total non-operating gain of $320,000.
Sales of finished goods from Vine to Devine totalled $920,000 in Year 10 and $1,920,000 in Year 11. These sales were priced to provide a gross profit margin on selling price
of 33 1/3% to the Vine Company. Devine's December 31, Year 10, inventory contained $276,000 of these sales; December 31, Year 11, inventory contained $576,000 of these
sales.
Sales of finished goods from Devine to Vine were $720,000 in Year 10 and $1,120,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of
40% to the Devine Company. Vine's December 31, Year 10, inventory contained $20,000 of these sales; the December 31, Year 11, inventory contained $420,000 of these
sales.
Vine's investment in Devine's account is carried in accordance with the cost method and includes advances to Devine of $120,000, which are also included in current
liabilities.
There are no intercompany amounts other than those noted, except for the dividends of $500,000 (total amount) declared and paid by Devine.
Transcribed Image Text:On January 1, Year 7, the Vine Company purchased 60,000 of the 80,000 ordinary shares of the Devine Company for $80 per share. On that date, Devine had ordinary shares of $3,580,000, and retained earnings of $2,020,000. When acquired, Devine had inventories with fair values $100,000 less than carrying amount, a parcel of land with a fair value $120,000 greater than the carrying amount, and equipment with a fair value $200,000 less than carrying amount. There were also internally generated patents with an estimated market value of $450,000 and a five-year remaining life. A long-term liability had a market value $150,000 greater than carrying amount; this liability was paid off December 31, Year 10. All other identifiable assets and liabilities of Devine had fair values equal to their carrying amounts. Devine's accumulated depreciation on the plant and equipment was $420,000 at the date of acquisition. At the acquisition date, the equipment had an expected remaining useful life of ten years. Both companies use the straight-line method for all depreciation and amortization calculations and the FIFO inventory cost flow assumption. Assume a 40% income tax rate on all applicable items and that there were no impairment losses for goodwill. On September 1, Year 11, Devine sold a parcel of land to Vine and recorded a total non-operating gain of $320,000. Sales of finished goods from Vine to Devine totalled $920,000 in Year 10 and $1,920,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 33 1/3% to the Vine Company. Devine's December 31, Year 10, inventory contained $276,000 of these sales; December 31, Year 11, inventory contained $576,000 of these sales. Sales of finished goods from Devine to Vine were $720,000 in Year 10 and $1,120,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 40% to the Devine Company. Vine's December 31, Year 10, inventory contained $20,000 of these sales; the December 31, Year 11, inventory contained $420,000 of these sales. Vine's investment in Devine's account is carried in accordance with the cost method and includes advances to Devine of $120,000, which are also included in current liabilities. There are no intercompany amounts other than those noted, except for the dividends of $500,000 (total amount) declared and paid by Devine.
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