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Pure Company purchased 70% of the ordinary shares of Gold Company on January 1, Year 6, for $484,800 when the latter company's accumulated depreciation, ordinary shares, and retained earnings were $76,000, $500,000 and $41,600, respectively. Non-controlling interest was valued at $196,900 by an independent business valuator at the date of acquisition. On this date, an appraisal of the assets of Gold disclosed the following differences: Land Plant and equipment Inventory Land Plant and equipment Less accumulated depreciation Carrying amount $ 161, 000 708, 000 134, 000 The plant and equipment had an estimated life of 20 years on this date. The statements of financial position of Pure and Gold, prepared on December 31, Year 11, follow: Patent (net of amortization) Investment in Gold Co. shares (equity method) Investment in Gold Co. bonds. Inventory Accounts receivable Cash Ordinary shares Retained earnings. Bonds payable (due Year 20) Accounts payable Fair value $ 212, 000 783, 000 117,000 Pure $ 107,000 635,000 (178, 000) 36,500 575, 082 227,000 230, 000 225, 150 46, 670 $1,904, 402 $750,000 1,097, 522 56, 880 $1.904 402 Gold $ 161,000 951, 000 (211, 000) 185, 500 173, 000 59, 100 $1,318, 600 $ 500,000 236, 100 477, 500 105,000 $1.318 600

Pure Company purchased 70% of the ordinary shares of Gold Company on January 1, Year 6, for $484,800 when the latter company's accumulated depreciation, ordinary shares, and retained earnings were $76,000, $500,000 and $41,600, respectively. Non-controlling interest was valued at $196,900 by an independent business valuator at the date of acquisition. On this date, an appraisal of the assets of Gold disclosed the following differences: Land Plant and equipment Inventory Land Plant and equipment Less accumulated depreciation Carrying amount $ 161, 000 708, 000 134, 000 The plant and equipment had an estimated life of 20 years on this date. The statements of financial position of Pure and Gold, prepared on December 31, Year 11, follow: Patent (net of amortization) Investment in Gold Co. shares (equity method) Investment in Gold Co. bonds. Inventory Accounts receivable Cash Ordinary shares Retained earnings. Bonds payable (due Year 20) Accounts payable Fair value $ 212, 000 783, 000 117,000 Pure $ 107,000 635,000 (178, 000) 36,500 575, 082 227,000 230, 000 225, 150 46, 670 $1,904, 402 $750,000 1,097, 522 56, 880 $1.904 402 Gold $ 161,000 951, 000 (211, 000) 185, 500 173, 000 59, 100 $1,318, 600 $ 500,000 236, 100 477, 500 105,000 $1.318 600

FINANCIAL ACCOUNTING
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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Pure Company purchased 70% of the ordinary shares of Gold Company on January 1, Year 6, for $484,800 when the latter company's accumulated depreciation, ordinary shares, and retained earnings were $76,000, $500,000 and $41,600, respectively. Non-controlling interest was valued at $196,900 by an independent business valuator at the date of acquisition. On this date, an appraisal of the assets of Gold disclosed the following differences: Land Plant and equipment Inventory Land Plant and equipment Less accumulated depreciation The plant and equipment had an estimated life of 20 years on this date. The statements of financial position of Pure and Gold, prepared on December 31, Year 11, follow: Carrying amount $ 161, 000 708, 000 134, 000 Patent (net of amortization) Investment in Gold Co. shares (equity method) Investment in Gold Co. bonds Inventory Accounts receivable Cash Ordinary shares Retained earnings Bonds payable (due Year 20) Accounts payable Fair value $ 212, 000 783, 000 117,000 Pure $ 107,000 635, 000 (178, 000) 36, 500 575, 082 227,000 230, 000 225, 150 46, 670 $1,904, 402 $750,000 1,097, 522 56, 880 $1,904, 402 Gold $ 161, 000 951, 000 (211, 000) 185, 500 173, 000 59, 100 $1,318, 600 $ 500,000 236, 100 477, 500 105,000 $1,318, 600
Transcribed Image Text:Pure Company purchased 70% of the ordinary shares of Gold Company on January 1, Year 6, for $484,800 when the latter company's accumulated depreciation, ordinary shares, and retained earnings were $76,000, $500,000 and $41,600, respectively. Non-controlling interest was valued at $196,900 by an independent business valuator at the date of acquisition. On this date, an appraisal of the assets of Gold disclosed the following differences: Land Plant and equipment Inventory Land Plant and equipment Less accumulated depreciation The plant and equipment had an estimated life of 20 years on this date. The statements of financial position of Pure and Gold, prepared on December 31, Year 11, follow: Carrying amount $ 161, 000 708, 000 134, 000 Patent (net of amortization) Investment in Gold Co. shares (equity method) Investment in Gold Co. bonds Inventory Accounts receivable Cash Ordinary shares Retained earnings Bonds payable (due Year 20) Accounts payable Fair value $ 212, 000 783, 000 117,000 Pure $ 107,000 635, 000 (178, 000) 36, 500 575, 082 227,000 230, 000 225, 150 46, 670 $1,904, 402 $750,000 1,097, 522 56, 880 $1,904, 402 Gold $ 161, 000 951, 000 (211, 000) 185, 500 173, 000 59, 100 $1,318, 600 $ 500,000 236, 100 477, 500 105,000 $1,318, 600
riant and equipment Less accumulated depreciation Patent (net of amortization) Investment in Gold Co. shares (equity method) Investment in Gold Co. bonds. Inventory Accounts receivable Cash Ordinary shares Retained earnings Bonds payable (due Year 20) Accounts payable Additional Information 035, UUU (178, 000) 36, 500 575, 082 227,000 230, 000 225, 150 46, 670 $1,904, 402 $750,000 1,097, 522 56, 880 $1,904, 402 951, 000 (211, 000) 185, 500 173, 000 59, 100 $1,318, 600 $ 500,000 236, 100 477, 500 105, 000 $1,318, 600 • Goodwill impairment tests have resulted in impairment losses totalling $18,500. • On January 1, Year 1, Gold issued $500,000 of 82% bonds at 90, maturing in 20 years (on December 31, Year 20). • On January 1, Year 11, Pure acquired $200,000 of Gold's bonds on the open market at a cost of $230,000. • On July 1, Year 8, Gold sold a patent to Pure for $68,000. The patent had a carrying amount on Gold's books of $47,000 on this date and an estimated remaining life of seven years. • Pure uses tax allocation (40% rate) and allocates bond gains between affiliates when it consolidates Gold. • Pure uses the equity method to account for its investment in Gold Company and the straight-line method to account for the amortization of bond premiums and discounts. Required: Prepare a consolidated statement of financial position as at December 31, Year 11. (Amounts to be deducted should be indicated with a minus sign.)
Transcribed Image Text:riant and equipment Less accumulated depreciation Patent (net of amortization) Investment in Gold Co. shares (equity method) Investment in Gold Co. bonds. Inventory Accounts receivable Cash Ordinary shares Retained earnings Bonds payable (due Year 20) Accounts payable Additional Information 035, UUU (178, 000) 36, 500 575, 082 227,000 230, 000 225, 150 46, 670 $1,904, 402 $750,000 1,097, 522 56, 880 $1,904, 402 951, 000 (211, 000) 185, 500 173, 000 59, 100 $1,318, 600 $ 500,000 236, 100 477, 500 105, 000 $1,318, 600 • Goodwill impairment tests have resulted in impairment losses totalling $18,500. • On January 1, Year 1, Gold issued $500,000 of 82% bonds at 90, maturing in 20 years (on December 31, Year 20). • On January 1, Year 11, Pure acquired $200,000 of Gold's bonds on the open market at a cost of $230,000. • On July 1, Year 8, Gold sold a patent to Pure for $68,000. The patent had a carrying amount on Gold's books of $47,000 on this date and an estimated remaining life of seven years. • Pure uses tax allocation (40% rate) and allocates bond gains between affiliates when it consolidates Gold. • Pure uses the equity method to account for its investment in Gold Company and the straight-line method to account for the amortization of bond premiums and discounts. Required: Prepare a consolidated statement of financial position as at December 31, Year 11. (Amounts to be deducted should be indicated with a minus sign.)
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