Equity in Net Income and Noncontrolling Interest in Net Income

Palm Resorts acquired its 70 percent interest in Sun City on January 1, 2017, for $41,750,000. The fair value of the 30 percent non‑

controlling interest at the date of acquisition was $14,750,000. Sun City’s date‑of‑acquisition reported net

assets of $5,000,000 were carried at amounts approximating fair value, but it had unrecorded identifiable

intangibles, capitalizable per ASC Topic 805, valued at $7,500,000. These intangibles are determined to

have limited lives, amortized on a straight-line basis over five years. It is now December 31, 2020, and

Sun City reports net income of $10,000,000.

Required

a. Calculate the amount of goodwill originally reported for this acquisition, and its allocation to the

controlling and noncontrolling interests.

b. Calculate equity in net income and the noncontrolling interest in net income for 2020, assuming

goodwill from this acquisition is impaired by $2,000,000 in 2020

Concord Inc. reported the following pretax income (loss) and related tax rates during the years 2019–2022.

Pretax financial income (loss) and taxable income (loss) were the same for all years since Concord began business. The tax rates from 2019–2022 were enacted in 2019.

1. Prepare the journal entries for the years 2020–2022 to record income taxes payable (refundable), income tax expense (benefit), and the tax effects of the loss carryforward. Assume that Concord expects to realize the benefits of any loss carryforward in the year that immediately follows the loss year

2. Prepare the portion of the income statement, starting with “Operating loss before income taxes,” for 2020.

3. Prepare the portion of the income statement, starting with “Income before income taxes,” for 2021.

B1 - Snow Company started operations on February 1, 2020 by depositing $3,000,000 cash in the bank as capital. The following transactions took place during the first month of operations:

February 3: Purchased supplies for $22,500 in cash.

February 9: Purchased equipment for $255,000, paid $105,000 in cash and the remaining amount will be paid after 10 days.

February 12: Received a bill from Dubai News for advertising amounted to $1,650.

February 14: Paid $24,000 salaries in cash.

February 16: Paid $6,000 utilities expense in cash.

February 17: Provided services to customers for $195,000 in cash.

February 19: Paid $150,000 for equipment purchased on February 9.

February 28: The owner withdrew $7,500 cash for personal use.

Required:

1. Prepare the trial balance of Snow Company on February 29, 2020.
2. Prepare the financial statements of Snow Company on February 29, 2020.

B1 - Snow Company started operations on February 1, 2020 by depositing $3,000,000 cash in the bank as capital. The following transactions took place during the first month of operations:

February 3: Purchased supplies for $22,500 in cash.

February 9: Purchased equipment for $255,000, paid $105,000 in cash and the remaining amount will be paid after 10 days.

February 12: Received a bill from Dubai News for advertising amounted to $1,650.

February 14: Paid $24,000 salaries in cash.

February 16: Paid $6,000 utilities expense in cash.

February 17: Provided services to customers for $195,000 in cash.

February 19: Paid $150,000 for equipment purchased on February 9.

February 28: The owner withdrew $7,500 cash for personal use.

Required:

1. Prepare the trial balance of Snow Company on February 29, 2020.
2. Prepare the financial statements of Snow Company on February 29, 2020.

Deneen's Manufacturing plan had 600 adding machines on hand May 1, 2019, each costing $16 each. Purchases and sales during May:

MONTH

DENEEN DOESN'T KEEP PERPETUAL INVENTORY RECORDS. SHE COUNTED 200 ADDING MACHINES ON HAND 5/31/2019.

1. WHAT WAS THE AMOUNT OF ENDING INVENTORY AT MAY 31, 2020, AND COST OF GOODS SOLD FOR THE MONTH ENDED MAY 31, 2019, UNDER THE FIFO METHOD.

2. WHAT WAS THE AMOUNT OF ENDING INVENTORY AT MAY 31, 2020, AND COST OF GOODS SOLD FOR THE MONTH ENDED MAY 31, 2019, UNDER THE LIFO METHOD?

3. WHAT WAS THE AMOUNT OF ENDING INVENTORY AT MAY 31, 2020, AND COST OF GOODS SOLD FOR THE MONTH ENDED MAY 31, 2019, UNDER THE AVERAGE COST METHOD?.

Towing Company manufactures and sells a single product for $40 per unit.
Variable costs are $30 per unit and fixed costs total $168,000. During
2019, the company sold 26,500 units of this product to customers. In
order to improve profitability, the president of Towing Company believes
the following changes should be made in 2020:

1. decrease the selling price of the product by 10%

2. automate a portion of the production process which will reduce
   variable costs by 5% per unit but will add an additional fixed
   cost of $16,310 per year

3. increase advertising by $49,420

Assume these changes are made. 
A) Calculate the number of units that Towing Company must sell in 2020 in order to earn a net income that is 20% greater than the net income earned in 2019.

B) Calculate the number of units that Towing Company must sell in 2020 in order to earn a target profit equal to 12% of sales.

Consider the market for wholesale market for milk in Tasmania in 2019 with a perfect elastic supply curve and downward sloping demand curve. The current equilibrium price of milk is $0.55 is per litre and 950 million litres of milk is bought and sold.

Suppose that in 2020 due to lower feed costs for dairy cows, the price drops to $0.45 per litre.

a. Calculate the change in the price using the cross/mid -point formula. Use the demand elasticity for wholesale milk of ε = - 0.5 to estimate the % change in quantity demanded for wholesale milk in 2020.

b. Use the following formula Q₁= (200% + %∆Q) ÷(200% - %∆Q) Q₀ to show that the quantity of wholesale milk bought and sold in 2020 is 1050 litres.

c. Illustrate in your diagram and calculate the change in the consumer surplus as result of the lower feed costs for dairy cows.

d. Explain why the consumer surplus for consumers of Tasmanian milk has changed?

Bramble Inc. reported the following pretax income (loss) and related tax rates during the years 2019–2022. Pretax Income (loss) Tax Rate 2019 $84,800 40 % 2020 (190,800) 40 % 2021 212,000 20 % 2022 106,000 20 % Pretax financial income (loss) and taxable income (loss) were the same for all years since Bramble began business. The tax rates from 2019–2022 were enacted in 2019.

Prepare the journal entries for the years 2020–2022 to record income taxes payable (refundable), income tax expense (benefit), and the tax effects of the loss carryforward. Assume that Bramble expects to realize the benefits of any loss carryforward in the year that immediately follows the loss year.

Prepare the portion of the income statement, starting with “Operating loss before income taxes,” for 2020.

Prepare the portion of the income statement, starting with “Income before income taxes,” for 2021.

The following facts are for a non-cancellable lease agreement between Ivanhoe Corporation and Russell Corporation, a lessee:

The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties about costs that have not yet been incurred by the lessor. The lessee assumes responsibility for all executory costs. Both Russell and Ivanhoe use IFRS 16.

Calculate the amount of gross investment at the inception of the lease for Ivanhoe Corporation, the lessor.

The following information was taken from Egeland Ltd.’s adjusted trial balance as at July 31, 2020:

Prepare a single-step statement of income for the year ended July 31, 2020.
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Prepare a multi-step statement of income for the year ended July 31, 2020.

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Determine Egeland’s gross margin percentage for the year. (Round answer to 1 decimal place, e.g. 52.7%.)

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If Egeland had 88,000 common shares outstanding throughout the year, determine the company's basic earnings per share. (Round answer to 2 decimal places, e.g. 52.75.)