28) On December 31, 20X2, the Esther Company purchased 80% of the outstanding common shares of the Jane Company for $7.5 million in cash. On that date, the shareholders' equity of Jane totalled $6 million and consisted of $1 million in no par common shares and $5 million in retained earnings. Both companies use the straight-line method to calculate depreciation and amortization. Goodwill, if any arises as a result of this business combination, is written down if there is a permanent impairment in its value.
For the year ending December 31, 20X4, the statements of comprehensive income for Esther and Jane were as follows:
EstherJane
Sales and other revenue$12,500,000$6,804,000
Cost of goods sold8,000,0004,000,000
Amortization expense1,500,0001,000,000
Other expenses1,800,0001,200,000
Net income$1,200,000$604,000
At December 31, 20X4, the condensed statements of financial position for the two companies were as follows:
EstherJane
Total assets$29,000,000$9,700,000
Liabilities$5,000,000$1,176,000
No par common shares12,100,0001,000,000
Retained earnings11,900,0007,524,000
Total$29,000,000$9,700,000
OTHER INFORMATION:
1.On December 31, 20X2, Jane had a building with a fair value that was $450,000 greater than its carrying value. The building had an estimated remaining useful life of 15 years.
2.On December 31, 20X2, Jane had inventory with a fair value that was $150,000 less than its carrying value. This inventory was sold in 20X3.
3.During 20X3, Jane sold merchandise to Esther for $100,000, a price that included a gross profit of $50,000. During 20X3, 40% of this merchandise was resold by Esther and the other 60% remained in its December 31, 20X3 inventories. On December 31, 20X4, the inventories of Esther contained merchandise purchased from Jane on which Jane had recognized a gross profit in the amount of $20,000. Total sales from Jane to Esther were $150,000 during 20X4.
4.During 20X4, Esther declared and paid dividends of $300,000 while Jane declared and paid dividends of $100,000.
5.Esther accounts for its investment in Jane using the cost method.
Required:
Calculate the non-controlling interest on the consolidated statement of financial position as at December 31, 20X4 under the entity method.
29) On December 31, 20X2, the Esther Company purchased 80% of the outstanding common shares of the Jane Company for $7.5 million in cash. On that date, the shareholders' equity of Jane totalled $6 million and consisted of $1 million in no par common shares and $5 million in retained earnings. Both companies use the straight-line method to calculate depreciation and amortization. Goodwill, if any arises as a result of this business combination, is written down if there is a permanent impairment in its value.
For the year ending December 31, 20X4, the statements of comprehensive income for Esther and Jane were as follows:
EstherJane
Sales and other revenue$12,500,000$6,804,000
Cost of goods sold8,000,0004,000,000
Amortization expense1,500,0001,000,000
Other expenses1,800,0001,200,000
Net income$1,200,000$604,000
At December 31, 20X4, the condensed statements of financial position for the two companies were as follows:
EstherJane
Total assets$29,000,000$9,700,000
Liabilities$5,000,000$1,176,000
No par common shares12,100,0001,000,000
Retained earnings11,900,0007,524,000
Total$29,000,000$9,700,000
OTHER INFORMATION:
1.On December 31, 20X2, Jane had a building with a fair value that was $450,000 greater than its carrying value. The building had an estimated remaining useful life of 15 years.
2.On December 31, 20X2, Jane had inventory with a fair value that was $150,000 less than its carrying value. This inventory was sold in 20X3.
3.During 20X3, Jane sold merchandise to Esther for $100,000, a price that included a gross profit of $50,000. During 20X3, 40% of this merchandise was resold by Esther and the other 60% remained in its December 31, 20X3 inventories. On December 31, 20X4, the inventories of Esther contained merchandise purchased from Jane on which Jane had recognized a gross profit in the amount of $20,000. Total sales from Jane to Esther were $150,000 during 20X4.
4.During 20X4, Esther declared and paid dividends of $300,000 while Jane declared and paid dividends of $100,000.
5.Esther accounts for its investment in Jane using the cost method.
Required:
Calculate the retained earnings balance on the consolidated statement of financial position as at December 31, 20X4 under the entity method.
