Balance sheets, 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:- Balance sheets

Approaches of the strategic human resource management, Approaches of the St...

Approaches of the Strategic human resource management (SHRM): 1. Attempts to the human linkage of some kind activities with competency based performance measures. 2. Attemp

Regulatory framework abroad, Regulatory Framework Abroad A regulatory m...

Regulatory Framework Abroad A regulatory mechanism, in terms of finance, is the mechanism to regulate the working of the financial system. Its function is to ensure the complia

Unemployed loans, where can i found a loan if i am unemployed ?

where can i found a loan if i am unemployed ?

Importance of the cost of capital, Q. Importance of the Cost of Capital? ...

Q. Importance of the Cost of Capital? Importance of the Cost of Capital:- (1) Useful in Designing the Capital Structure: - The perception of cost of capital plays a very imp

Finance, #qSeven years ago, after 15 years in public accounting, Stanley Bo...

#qSeven years ago, after 15 years in public accounting, Stanley Booker, CPA, resigned his posiition as Manager of Cost Systems for Davis, Cohen, and O''''''''Brien Public Accountan

Cross-sector analysis, Cross-Sector Analysis: The growth of a country d...

Cross-Sector Analysis: The growth of a country depends upon how fast a country can adapt to deregulation and internationalization. Deregulation and internationalization put com

Define decision rule for accepting or rejecting projects, What is the decis...

What is the decision rule for accepting or rejecting proposed projects while using net present value? While using the net present value decision rule any project along with a net

Evaluate consolidated income statement, The consolidated income statement...

The consolidated income statement for AB Group for the year ended 30 June 2010: (all amounts in the workings are in $000, unless stated otherwise)

Design a digital option as a sequence of calls, An individual agent thinks ...

An individual agent thinks that there is a high probability that the Dow Jones will have a payoff (or points) between a=10000 and b=12000 at t=1. Design a digital option (see Fi

Capitalization ratios, Capitalization ratios are used for determining the e...

Capitalization ratios are used for determining the extent to which the corporation is trading on its equity, and the resulting financial leverage. These ratios

Write Your Message!

Captcha
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!

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