I am extremely lost on how to answer this questions below and Ihave a test on this stuff next week. Please help!
On October 1, 2010, Madison Ltd. acquired all the shares ofDobson Ltd. for $849,600. On that date, Dobsonâs statement offinancial position showed share capital of $540,000 and retainedearnings of $273,600. In addition, at the acquisition date, all ofDobsonâs identifiable assets and liabilities had carrying valuesthat equaled their fair values.
Madison and Dobsonâs financial statements for September 30, 2014are presented below:
Statement of Financial Position
As of September 30, 2014
MadisonLtd. Dobson Ltd.
Assets:
Current assets:
Cash $ 144,000 $ 131,400
Short-terminvestments 27,000 122,400
Accountsreceivable 18,000 540,000
Inventory 302,400 64,800
491,400 858,600
Non-current assets:
Land 126,000 216,000
Equipment,net 75,600 27,000
Investment inDobson 849,600 ___-___
1,051,200 243,000
1,542,600 1,101,600
Liabilities and shareholdersâ equity:
Current liabilities:
Accountspayable 9,000 23,400
Non-current liabilities:
Deferred incometaxes 93,600 54,000
102,600 77,400
Shareholdersâ equity:
Sharecapital 900,000 540,000
Retainedearnings 540,000 484,200
1,440,000 1,024,200
$1,542,600 $1,101,600
Statement of Income
For the year ended September 30, 2014
MadisonLtd. Dobson Ltd.
Salesrevenue $2,152,500 $ 1,670,400
Cost ofsales 1,598,400 1,207,225
Grossprofit 554,100 463,175
Expenses:
Salaries andbenefits 103,500 57,600
Amortization 9,360 8,640
Other 7,200 __-___
120,060 66,240
Other revenues and expenses:
Investmentincome 300 1,225
Loss on disposal ofasset (1,800) __-___
432,540 398,160
Income taxexpense 173,016 213,264
Netincome $259,524 $ 184,896
Statement of Changes in Equity
For the year ended September 30, 2014
MadisonLtd. Dobson Ltd.
Share capital, October 1,2013 $ 900,000 $ 540,000
Changes during theyear ___-___ ___-___
Share capital, September 30,2014 900,000 540,000
Retained earnings, October 1,2013 424,476 299,304
Netincome 259,524 184,896
Dividendsdeclared (144,000) ______
Retained earnings, September 30,2014 540,000 484,200
$1,440,000 $ 1,024,200
Additional information:
Both companies use a perpetual inventory system, have aSeptember 30 year-end, and a 30% tax rate. Madison uses the entitytheory method for consolidation.
On June 30, 2014, Madison sold some equipment to Dobson for$10,800. At that date, the net book value of the equipment toMadison was $12,600. The equipment is expected to have a remaininguseful life of 10 years.
On April 1, 2014, Madison purchased $90,000 of merchandise fromDobson. Dobson had acquired the goods for $54,000. On July 15,Madison sold half of the goods to a customer for $50,400. Theremaining goods were still in Madisonâs inventory at its 2014fiscal year-end.
At October 1, 2013, Madison had some goods in inventory that ithad purchased from Dobson at May 25, 2013. The profit on thesegoods was $10,800. These goods were sold by December 31, 2013.
In 2011, Madison sold a tract of land to Dobson for anaccounting gain of $36,000. Dobson plans to build a warehouse andoffice complex on the land in 2015.
Required:
Prepare Madisonâs consolidated financial statements for the yearended September 30, 2014. (Round numbers to the nearest dollar, andshow all your calculations.)
I am extremely lost on how to answer this questions below and Ihave a test on this stuff next week. Please help!
On October 1, 2010, Madison Ltd. acquired all the shares ofDobson Ltd. for $849,600. On that date, Dobsonâs statement offinancial position showed share capital of $540,000 and retainedearnings of $273,600. In addition, at the acquisition date, all ofDobsonâs identifiable assets and liabilities had carrying valuesthat equaled their fair values.
Madison and Dobsonâs financial statements for September 30, 2014are presented below:
Statement of Financial Position
As of September 30, 2014
MadisonLtd. Dobson Ltd.
Assets:
Current assets:
Cash $ 144,000 $ 131,400
Short-terminvestments 27,000 122,400
Accountsreceivable 18,000 540,000
Inventory 302,400 64,800
491,400 858,600
Non-current assets:
Land 126,000 216,000
Equipment,net 75,600 27,000
Investment inDobson 849,600 ___-___
1,051,200 243,000
1,542,600 1,101,600
Liabilities and shareholdersâ equity:
Current liabilities:
Accountspayable 9,000 23,400
Non-current liabilities:
Deferred incometaxes 93,600 54,000
102,600 77,400
Shareholdersâ equity:
Sharecapital 900,000 540,000
Retainedearnings 540,000 484,200
1,440,000 1,024,200
$1,542,600 $1,101,600
Statement of Income
For the year ended September 30, 2014
MadisonLtd. Dobson Ltd.
Salesrevenue $2,152,500 $ 1,670,400
Cost ofsales 1,598,400 1,207,225
Grossprofit 554,100 463,175
Expenses:
Salaries andbenefits 103,500 57,600
Amortization 9,360 8,640
Other 7,200 __-___
120,060 66,240
Other revenues and expenses:
Investmentincome 300 1,225
Loss on disposal ofasset (1,800) __-___
432,540 398,160
Income taxexpense 173,016 213,264
Netincome $259,524 $ 184,896
Statement of Changes in Equity
For the year ended September 30, 2014
MadisonLtd. Dobson Ltd.
Share capital, October 1,2013 $ 900,000 $ 540,000
Changes during theyear ___-___ ___-___
Share capital, September 30,2014 900,000 540,000
Retained earnings, October 1,2013 424,476 299,304
Netincome 259,524 184,896
Dividendsdeclared (144,000) ______
Retained earnings, September 30,2014 540,000 484,200
$1,440,000 $ 1,024,200
Additional information:
Both companies use a perpetual inventory system, have aSeptember 30 year-end, and a 30% tax rate. Madison uses the entitytheory method for consolidation.
On June 30, 2014, Madison sold some equipment to Dobson for$10,800. At that date, the net book value of the equipment toMadison was $12,600. The equipment is expected to have a remaininguseful life of 10 years.
On April 1, 2014, Madison purchased $90,000 of merchandise fromDobson. Dobson had acquired the goods for $54,000. On July 15,Madison sold half of the goods to a customer for $50,400. Theremaining goods were still in Madisonâs inventory at its 2014fiscal year-end.
At October 1, 2013, Madison had some goods in inventory that ithad purchased from Dobson at May 25, 2013. The profit on thesegoods was $10,800. These goods were sold by December 31, 2013.
In 2011, Madison sold a tract of land to Dobson for anaccounting gain of $36,000. Dobson plans to build a warehouse andoffice complex on the land in 2015.
Required:
Prepare Madisonâs consolidated financial statements for the yearended September 30, 2014. (Round numbers to the nearest dollar, andshow all your calculations.)
