Question

Large Ltd. purchased 80% of Small Company on January 1, Year 6, for $660,000, when the statement of financial position for Small showed common shares of $490,000 and retained earnings of $190,000. On that date, the inventory of Small was undervalued by $51,000, and a patent with an estimated remaining life of five years was overvalued by $76,000.

Small reported the following subsequent to January 1, Year 6:

	Profit (Loss)			Dividends
Year 6	$	116,000		$	34,000
Year 7		(44,000	)		19,000
Year 8		99,000			49,000

A test for goodwill impairment on December 31, Year 8, indicated a loss of $20,200 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	$	590,000
Profit		290,000
Dividends		(61,000	)
Retained earnings, end	$	819,000

(b) Compute the following on the consolidated financial statements for the year ended December 31, Year 8: (Omit $ sign in your response.)

(i) Goodwill

Goodwill           $

(ii) Non-controlling interest on the statement of financial position

Non-controlling interest           $

(iii) Retained earnings, beginning of year

Retained earnings, beginning of year           $

(iv) Profit attributable to Large’s shareholders

Profit attributable to Large’s shareholders           $

(v) Profit attributable to non-controlling interest

Profit attributable to non-controlling interest           $

Answer 1

Refer the below images for the above mentioned questions, in a detailed way of solution.

Solution ; Requirement ® : $ 660000 cost of 8o4. investment Implied cost of 100-l investment $825ooo amount of carrying amount of carrying equity ordinary Retained small's net assets = Small's Shareholders Shares earnings = 490000 - 190000 $ 680000 $145000 Acquisition differential - Jan 1.year 6 → [s 825000 - $68.000] Allocated Inventory & S1000 patents $ (76000) Balance -goodwill $ (25000) $170000 Amortization particolars Balance Jant year 6 yr best year & Balance Dec 31 year 8 Inventory patents Goodwill $51000 $(76000) & 170000 $51000 $(30400) 1 (13200) $(30400) O $20200 3149800 $ 20600 15000 $119400 (145000

$ 149800 ) Goodwill ($ 170000 - $ 20200) i) Small's ordinary Shares: Small's retained earnings ($ 190000 + $ 116000 - $34000 -$44000 - 119000 + $99000 - 49000) $49000 $259000 $749000 un amortized acquisition differential 9 119 400 $868400 NIT'S Share (2010) ($8684008 2010) $173680 " 590000 Large's retained earnings Small's retained earnings ($190000 + $ 116000 - $ 34000 -$44000 - $ 19000) ; 9209000 small's retained earrings, date of 90000 acquisition : $19000 $(20600) Change Since acajuisition Less :- comolative amortigation of acquisition differential Adjusted change since acquistion Large's share (401) ($1600180") consolidated retained earnings since acquission $(1600) (1280) $588720

i Large's profit Less - Dividends from Small ($49000 X 801) $ 290000 $(39200) $ 210800 Small's profit less;- amortization of acaquisition differential § 99000 $(5000) 594000 $75200 Large's Share (861) - ($94000 x 80t) consolidated profit attributable to large's Shareholders $326000 - $18800 v) NCI on income Statement (194000 x 2010)