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On July 1, Year $, Big purchased 80% of the outstanding common shares of Little...

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Accounting

On July 1, Year $, Big purchased 80% of the outstanding common shares of Little for $122,080. On that date, Little's equipment had a fair value that was $21,600 less than carrying amount. The equipment had accumulated depreciation of $20,000 and an estimated remaining useful life of 8 years. Also, at the date of acquisition, Little had an exclusive contract with the provincial government to perform periodic environmental audits of selected mining companies for the next five years. An independent business valuator indicated that a third party might pay up to $50,000 to take over this contract. All other assets and liabilities had earrying amounts equal to fair values. On June 30, Year 6, goodwill had a recoverable amount of $20,000.
On June 30, Year 6, the following financial statements were prepared. Big uses the cost method to account for its investment.
NCOME STATEMENTS
Big
Sales
Investment income
Cost of sales
Expenses (misc.)
Net income
$ 270,000
\table[[10.800],[280.800],[140.100],[31.050],[171.150],[109.620]]
Link
5162,000
162,000
96330
24300
127530
5.30.430
RETAINED EARNINGS STATEMENTS
s 459,000
5.32.400
image

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