On December 31, 20X6, the Balance Sheets of Power Company

question 28

Essay

On December 31, 20X6, the balance sheets of Power Company and Pro Company are as follows (amounts in thousands):
$$\begin{array} { l l l l } & \text { Pawer } & \text { Pra } & \text { Pra (FV) } \\\text { Cash } & \$ 500 & \$ 800 & \\\text { Accounts receivable } & 1,500 & 1,700 & \\\text { Inventorips } & 2,000 & 1,500 & \\\text { Plant and Equipment (net) } & \underline { 2,500 } & \underline { 4,000 } & \$ 4,300 \\\text { Total Assets } & \$ 6,500 & \$ 8,000 &\end{array}$$ $\begin{array}{lll}\text { Current liabilities } & \$ 700 & \$ 400 \\\text { Long-term liabilities } & 800 & 500 &\$400\\\text { Common shares } & 2,500 & 1,000 \\\text { Contributed surplus } & 800 & 1,500 \\\text { Retained earnings } & \underline{1,700} & \underline{4,600} \\\text { Total equities } & \$ 6,500 & \$ 8,000\end{array}$
Power Company has 100,000 shares of common stock outstanding; Pro Company has 45,000 shares outstanding. All assets and liabilities have book values equal to fair values, except as noted.
The plant and equipment has an estimated remaining useful life of nine years from the date of acquisition. The long-term liabilities mature on December 31, 2020. The company estimates that straight-line amortization will approximate the effective interest rate method.
Required:
Assume that 80% of the outstanding shares of Pro were acquired for cash of $5.8 million. Calculate goodwill and the non-controlling interest on the consolidated statement of financial position at December 31, 20X6, under the entity method and the parent-company extension method.
At December 31, 20X9, the balance in the long term liabilities of Pro is still $500,000 and the balance of long term liabilities for Power is $900,000. Calculate the balance in the consolidated long-term liabilities at December 21, 20X9.

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