User Account

All Pages

Advanced Accounting, Financial Management

Assignment Help:
Balance Sheets







Peony

Ltd.


Aster

Ltd.




Assets:










Cash


$ 62,500


$ 25,000




Accounts receivable


187,500


200,000




Inventories


225,000


125,000




Equipment


6,250,000


3,375,000




Accumulated amortization


(2,212,500)


(1,550,000)




Investment in Aster Ltd.


1,000,000


-




Other investments


125,000


____-____




Total assets


$5,637,500


$2,175,000




Liabilities and Shareholders'' Equity










Accounts payable


$ 562,500


$ 250,000




Bonds payable


375,000


625,000




Total liabilities


937,500


875,000




Common shares


1,500,000


375,000




Retained earnings


3,200,000


925,000




Total shareholders'' equity


4,700,000


1,300,000




Total liabilities and shareholders'' equity


$5,637,500


$2,175,000




Income Statements

Year Ended December 31, 20X6







Peony

Ltd.


Aster

Ltd.




Sales revenue


$2,500,000


$1,875,000




Royalty revenue


187,500


-




Dividend income


93,750


____-____




Total revenue


2,781,250


1,875,000




Cost of sales


1,500,000


1,125,000




Other expenses


700,000


513,750




Total expenses


2,200,000


1,638,750




Net income


$ 581,250


$ 236,250


Statements of Retained Earnings

December 31, 20X6







Peony

Ltd.


Aster

Ltd.




Retained earnings, beginning of year


$2,993,750


$ 801,250




Net income


581,250


236,250




Dividends declared


(375,000)


(112,500)




Retained earnings, end of year


$3,200,000


$ 925,000

At January 1, 20X1, Peony Ltd. acquired 80% of the common shares of Aster Ltd. by issuing 500,000 Peony common shares valued at $2 per share. This resulted in Peony having 1,500,000 issued and outstanding shares.
Peony has provided the following information about Aster at the acquisition date:

Aster''s shareholders'' equity consisted of the following:

Common shares $375,000
Retained earnings 693,750

Fair value of Aster''s net identifiable assets equalled their carrying value, with the exception of the following items:

Excess of fair value
over carrying value:
Inventories $ 12,500
Equipment 93,750
Investments 12,500

The accumulated amortization on the equipment was $718,750. The equipment is amortized on a straight-line basis. At the acquisition date, the equipment is estimated to have a remaining life of 10 years with no residual value.
In 20X3, Aster sold its investments to parties outside the consolidated entity for $56,250 over carrying value.
From the acquisition date to December 31, 20X5, Aster paid royalties of $625,000 to Peony. During 20X6, Aster paid $112,500 in royalties to Peony.
At the beginning of 20X4, Peony purchased some equipment from Aster for $113,750. Aster had originally acquired the equipment for $125,000 and was amortizing it at a rate of $12,500 per year. When Aster sold the equipment to Peony, it had a carrying value of $87,500. At that time, Peony estimated that the equipment had a remaining life of 7 years and started amortizing the equipment in 20X4, using the straight-line method with no residual value.
At December 31, 20X5, Aster''s inventory included $25,000 of goods purchased from Peony. Peony''s gross margin on the sale was 40%. The goods were sold to third parties in 20X6.
At December 31, 20X5, Peony''s inventory included $125,000 of goods purchased from Aster. Aster''s gross margin on the sale was 40%. The goods were sold to third parties in 20X6.
During 20X6, Peony sold goods to Aster for $125,000. Peony''s gross margin on the sale was 40%. At December 31, 20X6, $50,000 of the goods are still in Aster''s inventory.
During 20X6, Aster sold goods to Peony for $875,000. Aster''s gross margin on the sale was 40%. At December 31, 20X6, $87,500 of the goods are still in Peony''s inventory.
Peony uses the entity method to report business combinations.

Required:

Prepare the consolidated financial statements for Peony at December 31, 20X6 using the direct method. Show all your work.

Related Discussions:- Advanced Accounting

What do you mean by treasury bills, Q. What do you mean by Treasury Bills? ...

Q. What do you mean by Treasury Bills? Treasury bills (TBs) are short-term government securities. The usual practice in India is to sell treasury bills at a discount and redeem

Determine market risk premium, To determine Henkel's corporate beta, unleve...

To determine Henkel's corporate beta, unlever (and relever) the ordinary least squares (OLS) market betas for each company in the European Household and Personal Care segment. Pric

Regulatory requirements for debentures, The following guideline...

The following guidelines are applicable for the issue of Fully Convertible Debentures (FCDs), Partly Convertible Debentures (PCDs) and Non-conve

Explain the marginal cost of capital schedule, What is a marginal cost of c...

What is a marginal cost of capital schedule (MCC)?  Is the schedule all the time a horizontal line?  Explain. The MCC schedule is a graphic depiction of the weighted average cost

Conversion value, Conversion value is the amount which investors wi...

Conversion value is the amount which investors will receive by immediately exchanging the bonds for equity stock and selling the stock at prevailing market

Stock exchange of hong kong, Stock Exchange of Hong Kong Securities tra...

Stock Exchange of Hong Kong Securities trading in Hong Kong started in 1866; however, the first formal stock market, the Association of Stockbrokers in Hong Kong, was establish

Risk and advantages associated with company locations, What are some of the...

What are some of the primary advantages when a corporation has operations in countries other than its home country?  What are some of the risks? Foreign operations may decrease

Planning to achieve budget goals, Planning to Achieve Budget Goals: It ...

Planning to Achieve Budget Goals: It is insufficient for an organisation or a project team to simply set budget goals and expect management and employees to work in the same ma

Put option, Put Option This is a right which is granted in exchange for...

Put Option This is a right which is granted in exchange for an agreed-upon sum to sell property. Options are mostly used frequently in securities transactions it also used stoc

Explain capital investment project appraisal, Question: (a) The future ...

Question: (a) The future value (F) of a sum invested now can be calculated using the formula: F = P(1 + r) n Required: (i) Describe each of the other constituents in the

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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