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Year 9. (12 marks)

On January 1, Year 3, the Pen Company purchased 80% of the outstanding voting shares of the Silk Company for $1.6 million in cash. On that date, Silk's balance sheet and the fair values of its identifiable assets and liabilities were as follows: On January 1, Year 3, Silk's plant and equipment had a remaining useful life of 8 years. Its long-term liabilities matured on January 1, Year 7 . Goodwill, if any, is to be tested yearly for impoirment. The balance sheets as on December 31 , Year 9 , for the two companies were as follows: Assignment Term 2227 Additional Information - The inventories of both companies have a maximum turnover period of one year. Receivables have a maximum turnover period of 62 days. - On July 1, Year 7, Pen sold a parcel of hand to Silk for $100,000. Pen had purchased this land in Year 4 for $150,000. On September 30, Year 9 , Silk sold the property to another company for $190,000. - During Year 9,$2 million of Pen's sales were to Silk. Of these sales, $500,000 remains in the December 31 , Year 9, inventories of Silk. The December 31, Year 8, inventories of Silk contained \$312,500 of merchandise purchased from Pen. Pen's saks to Silk are prioed to provide it with a groos profit of 20% - Pen and Silk reported net income of $1,000,000 and $400,000, respectively, for Year 9. - During Year 9,$1.5 million of Silk's sales were to Pen. Of these sales, $714,280 remains in the December 31, Year 9 , inventories of Pen. The December 31, Year 8 , inventories of Pen contained $857,140 of merchandise purchased from Silk. Silk's sales to Pen are priced to provide it with a groos profit of 30%. - Dividends declared on December 31, Year 9, were as follows: PenSilk$350,000100,000 - Goodwill impairment tests resulted in losses of $52,200 in Year 4 and $8,700 in Year 9. - Assume a 40% tax rate for both companies and that dividends have not yet been paid. Required a) Calculate acquisition differential. (3 marks) b) Calculate goodwill if any. ( 3 marks) c) Calculate acquisition non-controlling interests. ( 2 marks) d) Calculate amortization schedule of required assets and liabilities. (5 marks) e) Calculate intercompany profitloss after tax. (5 marks) f) Calculate consolidated retained earnings at January 1, Year 9. (7 marks) g) Calculate consolidated net income at December 31, Year 9. . (10 marks) h) Calculate consolidated non-controlling interests at December 31, Year 9 . ( 3 marks) i) Prepare the balance sheet for Year 9. (12 marks)

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