Large Ltd. purchased 70% of Small Company on January 1, Year 6, for $630,000, when the statement of financial position for Small showed common shares of $530,000 and retained earnings of $230,000. On that date, the inventory of Small was undervalued by $59,000, and a patent with an estimated remaining life of five years was overvalued by $84,000. Small reported the following subsequent to January 1, Year 6: Profit (Loss) Dividends $38,000 23,000 53,000 Year 6 Year 7 Year 8 $132,000 (48,000) 103,000 A test for goodwill impairment on December 31, Year 8, indicated a loss of $20,600 should be reported for Year 8 on the consolidated income statement. Large uses the cost method to account for its investment in Small and reported the following for Year 8 for its separate-entity statement of changes in equity: Retained earnings, beginning Profit Dividends Retained earnings, end $630,000 330,000 (57,000) $ 903,000

Large Ltd. purchased 70% of Small Company on January 1, Year 6, for $630,000, when the statement of financial position for Small showed common shares of $530,000 and retained earnings of $230,000. On that date, the inventory of Small was undervalued by $59,000, and a patent with an estimated remaining life of five years was overvalued by $84,000. Small reported the following subsequent to January 1, Year 6: Profit (Loss) Dividends $38,000 23,000 53,000 Year 6 Year 7 Year 8 $132,000 (48,000) 103,000 A test for goodwill impairment on December 31, Year 8, indicated a loss of $20,600 should be reported for Year 8 on the consolidated income statement. Large uses the cost method to account for its investment in Small and reported the following for Year 8 for its separate-entity statement of changes in equity: Retained earnings, beginning Profit Dividends Retained earnings, end $630,000 330,000 (57,000) $ 903,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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