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

Floating rate notes (frns), Floating Rate Notes (FRNs): When interest r...

Floating Rate Notes (FRNs): When interest rates are high and the general outlook is either stable or indicating the possibility of a downward trend in return, then an investor

Show the signs of overtrading, Q. Show the Signs of Overtrading? There ...

Q. Show the Signs of Overtrading? There are a number of usually recognised signs that a company may be overtrading. These are considered mutually with relevant financial data f

Define some instances of restrictive covenants, What are some instances of ...

What are some instances of restrictive covenants that might be fixed in a bond's indenture? An indenture might involve limitations on future borrowings, restrictions on dividen

Compute the rate of return on investment, Suppose you are a euro-based inve...

Suppose you are a euro-based investor who simply sold Microsoft shares which you had bought six months ago. You had invested 10,000 euros to buy Microsoft shares for $120 each shar

Mr.Manikanta, can u tell me the various approaches followed by FMCG Compani...

can u tell me the various approaches followed by FMCG Companies in test markets

Condition market to book value ratios be misleading, Under what circumstanc...

Under what circumstances would market to book value ratios be misleading?  Explain. The Market to Book ratio is helpful, but it is just only a rough approximation of how liquid

Lien, A legal claim on exact assets which were used to make loan secure.

A legal claim on exact assets which were used to make loan secure.

#title., EOQ

EOQ

Highest earnings-per-share, McGovern Company is comparing two disimilar cap...

McGovern Company is comparing two disimilar capital structures - an all-equity plan (Plan I) and a levered plan (Plan II).  Under Plan I, the Company would have 700,000 shares of s

Define deadweight loss, What is meant by deadweight loss?  Why does a price...

What is meant by deadweight loss?  Why does a price ceiling usually result in a deadweight loss? Deadweight loss considers to the benefits lost to either consumers or producers

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