On January 1, 20X8, Liv Ltd. (LL), a Canadian company, acquired 90% of Marcus Co. (MC), a foreign company for FC 623,200. At the acquisition date, the carrying value of MC’s net assets equaled their fair value except for the equipment, which had a carrying value of FC 800,000 and a fair value of FC 880,000. At the acquisition date, MC’s equipment had a remaining useful life of 10 years. There was an FC 4,000 impairment of the goodwill which occurred evenly throughout 20X8.

Selected financial statements for LL and MC are presented below.

Liv Ltd.

Statement of Financial Position
As of December 31, 20X8

(in $ CDN)

Assets:
Noncurrent assets:
Plant and equipment, net 2,752,000
Investment in Marcus Co. 1,371,040
4,123,040

Current assets:

Inventory   1,376,000
Accounts receivable 700,000
Cash and cash equivalents 562,080

2,638,080
Total assets 6,761,120

Shareholders’ Equity:

Share capital 1,376,000
Retained earnings 2,601,520
3,977,520
Liabilities:
Noncurrent liabilities:

Notes payable 1,860,000

Current liabilities:

Accounts payable and accrued liabilities    923,600
Total liabilities 2,783,600
Total shareholders’ equity and liabilities 6,761,120

Liv Ltd.

Statement of Income

For the year ended December 31, 20X8

(in $ CDN)

Sales 16,472,000

Dividend income   180,080

= 16,652,080

Cost of sales 8,256,000
Other expenses* 7,124,000 (15,380,000)

Net income 1,272,080

*includes depreciation

LL declared and paid dividends of $928,000 CDN on December 31, 20X8.

Marcus Co.

Statement of Financial Position

(in FC)

Dec. 31, Jan. 1
20X8 20X8

Assets:

Noncurrent assets:

Equipment, net 720,000 800,000

Current assets:

Inventory    484,000 364,000

Accounts receivable 408,000 280,000

Cash 360,000 164,000

1,252,000 808,000   

Total assets 1,972,000 1,608,000

Shareholders’ equity:

Share capital 400,000. 400,000
Retained earnings 390,000 146,000

= 790,000 = 546,000

Liabilities:

Noncurrent liabilities:

Notes payable 640,000 640,000

Current liabilities:

Accounts payable 542,000 422,000

Total liabilities 1,182,000. 1,062,000

Total shareholders’ equity and liabilities 1,972,000 1,608,000

Marcus Co.

Statement of Income

For the year ended December 31, 20X8

(in FC)

Sales 8,400,000
Cost of sales 5,304,000
Other expenses* 2,688,000 (7,992,000)

408,000

*includes depreciation

Marcus Co.

Statement of Changes in Equity – Retained Earnings Section

For the year ended December 31, 20X8

(in FC)

Retained earnings, January 1, 20X8 146,000
Net income 408,000

Dividends declared (164,000)

Retained earnings, December 31, 20X8 = 390,000

MC declared and paid FC164,000 in dividends on December 31, 20X8.

Selected Exchange Rates

January 1, 20X8 FC1 = $2.20 CDN
December 31, 20X8 FC1 = $2.44 CDN

Date when ending inventory was purchased FC1 = $2.38 CDN

Average rate for 20X8 FC1 = $2.32 CDN

Required:

1. Prepare consolidated financial statements at December 31, 20X8 under each of the following assumptions:
   
   i) the functional currency is $CAD

Link Company acquired Tuna Inc. on January 1, 2017. On January 1, 2017 all of Tuna's assets and liabilities had a FVs = BV except for the following:

Land was undervalued by $30,000

Buildings were overvalued by $45,000 (20-yr remaining useful life)

Equipment was undervalued by $90,000 (5-yr remaining useful life)

In addition, Tuna had internally developed a customer list with an appraised value of $150,000 and a 10-yr remaining useful life. Link originally acquired Tuna at the FV of its net identifiable assets that equaled $1,050,000.

The following are selected accounts for Link's Company and Tuna Inc as of December 31, 2021 ( Link's investment in Tuna and equity in Tuna's income accounts have been omitted). Credit balances are indicated by parenthesis:

Determine the proper December 31, 2021 consolidated totals for each of the following accounts:

Revenues, COGS, Depreciation Exps, Amortization Exps, Buildings net, Equipment net, Customer list, Common Stock, APIC.

Show work please!

Destin Company recently acquired several businesses and recognized goodwill in each acquisition. Destin has allocated the resulting goodwill to its three reporting units: Sand Dollar, Salty Dog, and Baytowne. Destin opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually.

In its current year assessment of goodwill, Destin provides the following individual asset and liability values for each reporting unit:

The fair values for each reporting unit (including goodwill) are $708,700 for Sand Dollar, $699,650 for Salty Dog, and $716,800 for Baytowne. To date, Destin has reported no goodwill impairments.

1. Determine which of Destin’s reporting units require both steps to test for goodwill impairment.

2. How much goodwill impairment should Destin report this year?

On January 1, 20X8, Liv Ltd. (LL), a Canadian company, acquired 90% of Marcus Co. (MC), a foreign company for FC 623,200. At the acquisition date, the carrying value of MC’s net assets equaled their fair value except for the equipment, which had a carrying value of FC 800,000 and a fair value of FC 880,000. At the acquisition date, MC’s equipment had a remaining useful life of 10 years. There was an FC 4,000 impairment of the goodwill which occurred evenly throughout 20X8.

Selected financial statements for LL and MC are presented below.

Liv Ltd.

Statement of Financial Position
As of December 31, 20X8

(in $ CDN)

Assets:
Noncurrent assets:
Plant and equipment, net 2,752,000
Investment in Marcus Co. 1,371,040
4,123,040

Current assets:

Inventory   1,376,000
Accounts receivable 700,000
Cash and cash equivalents 562,080

2,638,080
Total assets 6,761,120

Shareholders’ Equity:

Share capital 1,376,000
Retained earnings 2,601,520
3,977,520
Liabilities:
Noncurrent liabilities:

Notes payable 1,860,000

Current liabilities:

Accounts payable and accrued liabilities    923,600
Total liabilities 2,783,600
Total shareholders’ equity and liabilities 6,761,120

Liv Ltd.

Statement of Income

For the year ended December 31, 20X8

(in $ CDN)

Sales 16,472,000

Dividend income   180,080

= 16,652,080

Cost of sales 8,256,000
Other expenses* 7,124,000 (15,380,000)

Net income 1,272,080

*includes depreciation

LL declared and paid dividends of $928,000 CDN on December 31, 20X8.

Marcus Co.

Statement of Financial Position

(in FC)

Dec. 31, Jan. 1
20X8 20X8

Assets:

Noncurrent assets:

Equipment, net 720,000 800,000

Current assets:

Inventory    484,000 364,000

Accounts receivable 408,000 280,000

Cash 360,000 164,000

1,252,000 808,000   

Total assets 1,972,000 1,608,000

Shareholders’ equity:

Share capital 400,000. 400,000
Retained earnings 390,000 146,000

= 790,000 = 546,000

Liabilities:

Noncurrent liabilities:

Notes payable 640,000 640,000

Current liabilities:

Accounts payable 542,000 422,000

Total liabilities 1,182,000. 1,062,000

Total shareholders’ equity and liabilities 1,972,000 1,608,000

Marcus Co.

Statement of Income

For the year ended December 31, 20X8

(in FC)

Sales 8,400,000
Cost of sales 5,304,000
Other expenses* 2,688,000 (7,992,000)

408,000

*includes depreciation

Marcus Co.

Statement of Changes in Equity – Retained Earnings Section

For the year ended December 31, 20X8

(in FC)

Retained earnings, January 1, 20X8 146,000
Net income 408,000

Dividends declared (164,000)

Retained earnings, December 31, 20X8 = 390,000

MC declared and paid FC164,000 in dividends on December 31, 20X8.

Selected Exchange Rates

January 1, 20X8 FC1 = $2.20 CDN
December 31, 20X8 FC1 = $2.44 CDN

Date when ending inventory was purchased FC1 = $2.38 CDN

Average rate for 20X8 FC1 = $2.32 CDN

Required:

1. Prepare consolidated financial statements at December 31, 20X8 under each of the following assumption
   1. The function current is the FC

On January 1, 20X8, Liv Ltd. (LL), a Canadian company, acquired 90% of Marcus Co. (MC), a foreign company for FC 623,200. At the acquisition date, the carrying value of MC’s net assets equaled their fair value except for the equipment, which had a carrying value of FC 800,000 and a fair value of FC 880,000. At the acquisition date, MC’s equipment had a remaining useful life of 10 years. There was an FC 4,000 impairment of the goodwill which occurred evenly throughout 20X8.

Selected financial statements for LL and MC are presented below.

Liv Ltd.

Statement of Financial Position
As of December 31, 20X8

(in $ CDN)

Assets:
Noncurrent assets:
Plant and equipment, net 2,752,000
Investment in Marcus Co. 1,371,040
4,123,040

Current assets:

Inventory   1,376,000
Accounts receivable 700,000
Cash and cash equivalents 562,080

2,638,080
Total assets 6,761,120

Shareholders’ Equity:

Share capital 1,376,000
Retained earnings 2,601,520
3,977,520
Liabilities:
Noncurrent liabilities:

Notes payable 1,860,000

Current liabilities:

Accounts payable and accrued liabilities    923,600
Total liabilities 2,783,600
Total shareholders’ equity and liabilities 6,761,120

Liv Ltd.

Statement of Income

For the year ended December 31, 20X8

(in $ CDN)

Sales 16,472,000

Dividend income   180,080

= 16,652,080

Cost of sales 8,256,000
Other expenses* 7,124,000 (15,380,000)

Net income 1,272,080

*includes depreciation

LL declared and paid dividends of $928,000 CDN on December 31, 20X8.

Marcus Co.

Statement of Financial Position

(in FC)

Dec. 31, Jan. 1
20X8 20X8

Assets:

Noncurrent assets:

Equipment, net 720,000 800,000

Current assets:

Inventory    484,000 364,000

Accounts receivable 408,000 280,000

Cash 360,000 164,000

1,252,000 808,000   

Total assets 1,972,000 1,608,000

Shareholders’ equity:

Share capital 400,000. 400,000
Retained earnings 390,000 146,000

= 790,000 = 546,000

Liabilities:

Noncurrent liabilities:

Notes payable 640,000 640,000

Current liabilities:

Accounts payable 542,000 422,000

Total liabilities 1,182,000. 1,062,000

Total shareholders’ equity and liabilities 1,972,000 1,608,000

Marcus Co.

Statement of Income

For the year ended December 31, 20X8

(in FC)

Sales 8,400,000
Cost of sales 5,304,000
Other expenses* 2,688,000 (7,992,000)

408,000

*includes depreciation

Marcus Co.

Statement of Changes in Equity – Retained Earnings Section

For the year ended December 31, 20X8

(in FC)

Retained earnings, January 1, 20X8 146,000
Net income 408,000

Dividends declared (164,000)

Retained earnings, December 31, 20X8 = 390,000

MC declared and paid FC164,000 in dividends on December 31, 20X8.

Selected Exchange Rates

January 1, 20X8 FC1 = $2.20 CDN
December 31, 20X8 FC1 = $2.44 CDN

Date when ending inventory was purchased FC1 = $2.38 CDN

Average rate for 20X8 FC1 = $2.32 CDN

Required:

1. Assume that LL is a private company and reports under ASPE. LL uses the equity method to report its investment in MC. LL’s functional currency is $CAD. Calculate LL’s Investment in Marcus Co.’s account at December 31, 20X8. There is no need to prepare financial statements.

On January 1, 20X8, Liv Ltd. (LL), a Canadian company, acquired 90% of Marcus Co. (MC), a foreign company for FC 623,200. At the acquisition date, the carrying value of MC’s net assets equaled their fair value except for the equipment, which had a carrying value of FC 800,000 and a fair value of FC 880,000. At the acquisition date, MC’s equipment had a remaining useful life of 10 years. There was an FC 4,000 impairment of the goodwill which occurred evenly throughout 20X8.

Selected financial statements for LL and MC are presented below.

Liv Ltd.

Statement of Financial Position
As of December 31, 20X8

(in $ CDN)

Assets:
Noncurrent assets:
Plant and equipment, net 2,752,000
Investment in Marcus Co. 1,371,040
4,123,040

Current assets:

Inventory   1,376,000
Accounts receivable 700,000
Cash and cash equivalents 562,080

2,638,080
Total assets 6,761,120

Shareholders’ Equity:

Share capital 1,376,000
Retained earnings 2,601,520
3,977,520
Liabilities:
Noncurrent liabilities:

Notes payable 1,860,000

Current liabilities:

Accounts payable and accrued liabilities    923,600
Total liabilities 2,783,600
Total shareholders’ equity and liabilities 6,761,120

Liv Ltd.

Statement of Income

For the year ended December 31, 20X8

(in $ CDN)

Sales 16,472,000

Dividend income   180,080

= 16,652,080

Cost of sales 8,256,000
Other expenses* 7,124,000 (15,380,000)

Net income 1,272,080

*includes depreciation

LL declared and paid dividends of $928,000 CDN on December 31, 20X8.

Marcus Co.

Statement of Financial Position

(in FC)

Dec. 31, Jan. 1
20X8 20X8

Assets:

Noncurrent assets:

Equipment, net 720,000 800,000

Current assets:

Inventory    484,000 364,000

Accounts receivable 408,000 280,000

Cash 360,000 164,000

1,252,000 808,000   

Total assets 1,972,000 1,608,000

Shareholders’ equity:

Share capital 400,000. 400,000
Retained earnings 390,000 146,000

= 790,000 = 546,000

Liabilities:

Noncurrent liabilities:

Notes payable 640,000 640,000

Current liabilities:

Accounts payable 542,000 422,000

Total liabilities 1,182,000. 1,062,000

Total shareholders’ equity and liabilities 1,972,000 1,608,000

Marcus Co.

Statement of Income

For the year ended December 31, 20X8

(in FC)

Sales 8,400,000
Cost of sales 5,304,000
Other expenses* 2,688,000 (7,992,000)

408,000

*includes depreciation

Marcus Co.

Statement of Changes in Equity – Retained Earnings Section

For the year ended December 31, 20X8

(in FC)

Retained earnings, January 1, 20X8 146,000
Net income 408,000

Dividends declared (164,000)

Retained earnings, December 31, 20X8 = 390,000

MC declared and paid FC164,000 in dividends on December 31, 20X8.

Selected Exchange Rates

January 1, 20X8 FC1 = $2.20 CDN
December 31, 20X8 FC1 = $2.44 CDN

Date when ending inventory was purchased FC1 = $2.38 CDN

Average rate for 20X8 FC1 = $2.32 CDN

Required:

1. Prepare consolidated financial statements at December 31, 20X8 under each of the following assumption
   1. The function current is the FC

Destin Company recently acquired several businesses and recognized goodwill in each acquisition. Destin has allocated the resulting goodwill to its three reporting units: Sand Dollar, Salty Dog, and Baytowne. Destin opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually.

In its current year assessment of goodwill, Destin provides the following individual asset and liability values for each reporting unit:

The fair values for each reporting unit (including goodwill) are $781,400 for Sand Dollar, $789,900 for Salty Dog, and $712,750 for Baytowne. To date, Destin has reported no goodwill impairments.

How much goodwill impairment should Destin report this year?

Alcorn Service Company was formed on January 1, 2018.

Events Affecting the 2018 Accounting Period

1. Acquired $72,000 cash from the issue of common stock.

2. Purchased $3,600 of supplies on account.

3. Purchased land that cost $42,000 cash.

4. Paid $3,600 cash to settle accounts payable created in Event 2.

5. Recognized revenue on account of $66,000.

6. Paid $33,000 cash for other operating expenses.

7. Collected $50,000 cash from accounts receivable.

Information for 2018 Adjusting Entries

8. Recognized accrued salaries of $4,400 on December 31, 2018.

9. Had $1,400 of supplies on hand at the end of the accounting period.

Events Affecting the 2019 Accounting Period

1. Acquired $32,000 cash from the issue of common stock.

2. Paid $4,400 cash to settle the salaries payable obligation.

3. Paid $7,200 cash in advance to lease office space.

4. Sold the land that cost $42,000 for $42,000 cash.

5. Received $8,400 cash in advance for services to be performed in the future.

6. Purchased $2,200 of supplies on account during the year.

7. Provided services on account of $44,000.

8. Collected $45,000 cash from accounts receivable.

9. Paid a cash dividend of $4,000 to the stockholders.

10. Paid other operating expenses of $31,500.

Information for 2019 Adjusting Entries

11. The advance payment for rental of the office space (see Event 3) was made on March 1 for a one-year term.

12. The cash advance for services to be provided in the future was collected on October 1 (see Event 5). The one-year contract started on October 1.

13. Had $1,500 of supplies remaining on hand at the end of the period.

14. Recognized accrued salaries of $5,100 at the end of the accounting period.

15. Recognized $1,600 of accrued interest revenue.

1. b-1. Prepare an income statement for 2018 and 2019.

2. b-2. Prepare the statement of changes in stockholders’ equity for 2018 and 2019.

3. b-3. Prepare the balance sheet for 2018 and 2019.

4. b-4. Prepare the statement of cash flows for 2018 and 2019, using the vertical statements model.

Purple Company acquired 80 percent of Silver Company's outstanding common stock for $592,000 on January 1, 20X7. On the date of acquisition, the book value and fair value of Silver Company's net assets were equal. Purple Company uses the equity method to account for investments. Trial balance data for Purple and Silver as of January 1, 20X7 are as follows:

Immediately after acquisition, the consolidation worksheet was completed with all of the appropriate elimination entries (including pre-acquisition accumulated depreciation). The last column of the worksheet showing the consolidated totals has been left blank. Fill in the consolidated totals and identify the account marked with a "?" that will be included on the consolidated balance sheet.

2. Loki Corporation acquired 80 percent ownership of Goose Company on January 1, 20X6, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of Goose Company. Consolidated balance sheets at January 1, 20X8, and December 31, 20X8, are as follows:

The consolidated income statement for 20X8 contained the following amounts:

Loki and Goose paid dividends of $25,000 and $15,000, respectively, in 20X8.

Required:

1) Prepare a worksheet to develop a consolidated statement of cash flows for 20X8 using the indirect method of computing cash flows from operations. (8 points)

2) Prepare a consolidated statement of cash flows for 20X8. (12 points)