Aztec purchased 70% of the outstanding shares of Inca Limited on January 1, 20X2, at a cost of $84,000. Aztec has always used the cost method to account for its investments. On January 1, 20X2, Inca had common shares of $50,000 and retained earnings of $30,000, and fair values were equal to carrying value for all of its net assets except for inventory (fair value was $9,000 less than carrying value) and equipment (fair value was $24,000 greater than carrying value). The equipment had an estimated remaining life of six years on January 1, 20X2.
The following are the separate-entity of Aztec and Inca at December 31, 20X5:
Additional Information
1. During 20X5, Inca made a cash payment of $2,000 per month to Aztec for management fees, which is included in Incas other expenses.
2. During 20X5, Aztec made intercompany sales of $100,000 to Inca. The December 31, 20X5, inventory of Inca contained goods purchased from Aztec amounting to $30,000. These sales had a gross profit of 35%.
3. On April 1, 20X5, Aztec acquired land from Inca for $40,000. This land had been recorded on Incas books at a net carrying value of $20,000. Aztec paid for the land by signing a $40,000 note payable to Inca, bearing interest at 8%. Interest for 20X5 was paid by Aztec in cash on December 31, 20X5. This land was still being held by Aztec on December 31, 20X5.
4. The fair value of the consolidated remained unchanged from January 1, 20X2, to July 1, 20X5. On July 1, 20X5, a valuation was performed, indicating that the fair value of consolidated was $3,500.
Required
1. Prepare a calculation of and any unamortized fair value adjustment as at December 31, 20X5.
2. Prepare Aztecs consolidated SCI for the year ended December 31, 20X5.
3. Calculate the following balances that would appear on Aztecs consolidated statement of financial position as at December 31, 20X5:
i. inventory;
ii. land;
iii. notes payable;
iv. non-controlling interest; and
v. common shares.
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