On April 1 st . Year 2017, X Company purchased

On April 1st. Year 2017, X Company purchased 80% of the Y Company for $1,000,000.

At that date the common shares of Y was $450,000 and retained earnings $ 525,000

At this date the book values and fair values of the assets and liabilities of the Y Company were equal to their fair values except for the following items.

                                                                           Book Value………………Fair Value

Plant and equipment…………………………………….60,000……………….….…..80,000

Accounts receivable………………………………………40,000……………………….50,000

Inventories………………………………………………….. 80,000………………….……45,000

Accounts payable……………………………………….. 50,000………………….……55,000

The plant and equipment had a remaining useful life of 10 years.

Goodwill testing resulted in impairment in goodwill in 2019 of $60,000 and $35,000 in 2020.

The financial statements for the two companies for the year ended December 31, 2020 were as follows:-

Assets:-

Cash………………………………………………………$ 12,000…………………..…$ 25,000

Accounts receivable………………………………. 200,000……………………….230,000

Inventories…………………………………………….. 185,000…………………….. 250,000

Capital assets, net………………………………….1,445,000……………………… 840,000

Investment in the Y Company…………………1,000,000……………………………….

TOTAL ASSETS……………………………………$ 2,842,000………………….$1,345,000

Liabilities & Owners’ Equity:-

Accounts payable………………………………….$ 240,000…………………..$ 130,000

Other liabilities………………………………………. 320,000………………………. 65,000

Common Shares…………………………………… 1,200,000…………………. …. 450,000

Retained Earnings……………………………………1,082,000……………………. 700,000

TOTAL LIABILITIES & OWNERS’ EQUITY.$ 2,842,000………………….$1,345,000

 

Sales…………………………………………………………$2,900,000……………… $ 955,000

Dividends…………………………………………………… 64,000

Cost of goods sold……………………………………… 1,500,000………………… 545,000

Gross Margin…………………………………………….. 1,464,000…………………. 410,000

Amortization Expense…………………………………… 245,000………………. . 90,000

Other expenses……………………………………………. 130,000………………… . 30,000

Dividends…………………………………………………….. 400,000………………… 80,000

Income Taxes……………………………………………… 185,000………………….. 21,000

NET INCOME AFTER TAXES………………………….$ 504,000………………..$189,000

Additional Information:-

1.         On September 1st. 2018, Y purchased a machine from X for $52,000.  The machine had a net book value of $40,000 and an estimated useful life of 8 years at the time of the sale to Y.

2.         The 2020 opening inventories of X contained $50,000 of merchandise purchased from Y during 2019. Y had recorded a profit of $20,000 on these sales.

3.         During 2020, Y sales to X totaled $24,000.  These sales were made at a 20% mark up on cost.

4.         During 2020, X sales to Y totaled $50,000.  Y’s ending inventories in 2020 contained $30,000 of merchandise purchase from X.  X charges Y a 10% mark up on sales.

5.         Both companies use a 40% tax rate.

 

Required

1.         Calculate consolidated net income for the year ending December 31st 2020

2.         What is the net income attributable to non-controlling interest

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