Poseidon Ltd. (P Ltd.) bought 80% of the voting shares of Submarine Ltd. (S Ltd.) for $470,000 at January 1, 20X5. S Ltd. had the following statement of financial position at that date:
The bonds on S Ltd.s statement of financial position were issued on January 1, 20X5, at interest is paid July 1 and December 31.
All inventory on the books of S at January 1, 20X5, was sold during the year. P sold $400,000 (cost of goods) to S for $500,000D during 20X5, and 20% of the inventory was on hand at the end of the year. P sold land to S (cost $30,000) for $90,000. P purchased $60,000 of Ss bonds on July 2, 20X5, for $64,000. The premium will be amortized straightline over the remaining life of the bonds. Any will be tested on an annual basis for impairment. Ss plant and equipment have 10 years (straight-line amortization) remaining.
S had a net income of $100,000 for 20X5 and paid no dividends.
The statements of financial position for the two companies at December 31, 20X5, are:
Required
Calculate the balances of the following selected accounts, at December 31, 20X5, that would appear on the consolidated statement of financial position. Ignore income taxes for this problem.
1. Inventory;
2. Land;
3. Capital assets;
4. Bonds payable; and
5. Retained earnings.
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