Balance Sheet and Sylvan Essay Example for Free

oddment Sheet and Sylvan EssayOn January 1 2007, linchpin purchased 60% of the common shares of Sylvan for $4,500. On that date, Sylvan had common shares of $1,250 and retained earnings of $3,000. Fair values were equal to carrying values for all Sylvans net assets except inventory, capital assets and notes inventable. The beautiful value of inventory was $60 more than book value, the book value of capital assets was $100 greater than just value and the Notes payable had a fair value of $150 less than book value. Assume that all shares of Sylvan have the same value and no control premium was paid at the date of acquisition. The Consolidated Financial statements will be prepared using IFRS Entity Method.The financial statements for Pillar and Sylvan for the year ended declination 31, 2010 were as follows Balance SheetsDecember 31, 2010$000sPILLARSYLVANCash$680$435Accounts receivable1,7551,025Inventory2,8491,790Capital assetsnet3,9763,000 investiture in Sylvan4,500Total asse ts$13,760$6,250Current liabilities$ cd$255Notes payable5,8001,185Common shares2,0001,250Retained earnings5,5603,560Total$13,760$6,250Statements of Income and Retained breadYear Ended December 31, 2010PILLARSYLVANSales and all different Income$4,040$2,710Cost of sales1,6001,1402,4401,570Amortization(480)(310)Other expenses and losses including taxes(500)(210)Net income1,4601,050Additional information numbers in $000s1. Capital assets are to be amortized oer an average remaining useful life of 8 years at January 1, 2007 and the notes payable mature on December 31, 2011. Goodwill impairment losses for 2008 and 2010 were $240 and $ three hundred respectively. Straight line amortization is acceptable for all acquisition differentials.2. At December 31, 2010, Sylvans inventory included goods purchased from Pillar for $760. Total purchases from Pillar in 2010 were $1000 all priced at mark-ups averaging 25% of Pillars cost.3. On December 31, 2009, the inventories of Pillar contained $500 of merchandise purchased from Sylvan. Sylvan earns a gross margin of 30% on all sales to Pillar. During December 2010, Pillar purchased merchandise from Sylvan for $900 and did not pay for$250 of the purchases by December 31, 2010. 40% of the inventory was resold by Pillar before the year end.4. On July 1, 2010, Sylvan sold a new tract of Land to Pillar for $170. On December 1, 2009, Sylvan had bought the land for $200. The fair market value of the land at July 1, 2010 was $220.5. On September 30, 2008, Pillar sold Land to Sylvan for $100. The land had a book value of $60 on the date of the sale.6. On December 1, 2010, Pillar and Sylvan declared and paid dividends of $150 and $100 respectively.7. Both companies pay taxes at the rate of 40%. Assume all intercompany Transactions are taxed at 40%REQUIRED Please use a GREEN brochure1. Prepare a Consolidated Balance Sheet at December 31, 2010. (22 Marks) 2. Prepare an independent calculation of ENDING Consolidated Retained Earnings at D ecember 31, 2010. (11 marks) 3. Assume Pillar wishes to use the paleness manner in their General Ledger, calculate Investment income from Sylvan for the year ending December 31, 2010 (10 Marks) posterThis question will help you prepare for the technical question on the midterm. Do more than the question asks so that you are prepared for any likely questions you may be asked Eg. Prepare a Consolidated Income statement and an independent calculation of Consolidated Net Income attributable to Parent company shareholders Calculate the Investment Income under the equity method Note the only difference between the equity method used when significant Influence is present and the equity method used in the general ledger of the parent when control is present is the treatment of downstream transactions. According to IAS 28.28 all unsuccessful intercompany profits are eliminated pro rata between investor and investee. Therefore if investor owns 30% of investee, 30% of all unrealized profit s/losses are removed. When control exists the parent eliminates upstream proportionately with NCI and downstream unrealized profits are eliminated 100% from parent. Check figuresAt December 31, 2010Goodwill at acquisition ($3,140)$2,600Consolidated total Assets$17,615.6Capital assets$6916Consolidated Retained Earnings$5331.28NCI Balance Sheet$2924.32Consolidated Net Income Entity$2052.1Attributable to Parent shareholders1754.78Attributable to NCI$297.32Investment account Balance sheet equity method$4,271.28Investment income equity method 2010$354.78(removing 100% downstream)