Question

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Accounting question in regards to subsidiary's preferred shares without parent's holdings

Should goodwill be negative? Do I still impair negative goodwill? I am simply looking for check numbers such as consolidated net income, consolidated total assets, consolidated retained earnings, etc.

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Purple Co. purchased 80% of the voting shares of Silver Ltd. on January 1, 20x2, for $669,200. On that date, Silver had the following balance sheet and related asset fair values. SILVER LTD. Balance Sheet at January 1, 20x2 Assets Book value Fair value Cash $ 38,000 $ 38,000 Inventory 207,000 252,000 Land 195,000 195,000 Property, plant and equipment 1,010,000 900,000 Total assets 5.1m m Liabilities Accounts payable $ 100,000 $ 100,000 Shareholders' equity Preferred shares 450,000 Common shares 750,000 Retained earnings 150,000 Total liabilities and equities W The preferred shares are non-voting and are entitled to 10% cumulative dividends. At January 1, 20X2, there were cumulative dividends in arrears of $45,000, which were paid in 20X2. The preferred shares carried a call premium of 8% of face value. During 20X2, Silver earned $300,000 in income, and Purple earned $496,000. Dividends were declared and paid as follows: Silver Purple Preferred shareholders 55 90,000 Common shareholders $150,000 $286,000 During 20X2, there were no interoompany transactions. Property, plant and equipment have a remaining useful life of 10 years. Goodwill was impaired by $4,125 for 20x2. Purple reoords its investment in Silver using the cost method.

The financial statements for Purple and Silver at December 31, 20x2, are as follows: Assets Cash Inventory Land Property, plant and equipment Investment in Silver Total assets Liabilities Accounts payable Shareholders' equity Preferred shares Common shares Retained earnings Total liabilities and equities Sales Cost of goods sold Gross profit Expenses: Administration Depreciation Other expenses Investment income Net income Retained earnings at January 1, 20X2 Dividends — Preferred — Co m mon Required 1. Prepare all calculations required for consolidation as at December 31, 20X2. Balance Sheets at December 31, 20X2 2. Prepare the consolidated financial statements at December 31, 20x2 PURPLE $ 370,000 260,800 720,000 940,000 669,200 5.2mm $ 138,000 1,000,000 1 ,822,000 5.2mm Statements of Income and Retained Earnings for the year ended December 31, 20X2 PURPLE $4,045,000 2 556 000 1 489 000 680,000 188,000 245,000 1,113,000 120,000 496,000 1,612,000 2, 108,000 286,000 W SILVER $ 45,000 210,000 195,000 1,050,000 M $ 90,000 450,000 750,000 210,000 5.1mm SILVER $960,000 370 000 590,000 73,000 49,000 168,000 290,000 300,000 150,000 450,000 90,000 150,000 5.210.000

Purple Co. purchased 80% of the voting shares of Silver Ltd. on January 1, 20x2, for $669,200. On that date, Silver had the following balance sheet...
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