Hattrick Corp $\quad$ $\quad$ Hattrick Revenues $\begin{array}{l}\text { Sales }&\$265,000&\$121,000\\\text { Interest, dividend, \& lease income }&13,000&600\\&278,000&121,600\end{array}$

question 10

Essay

Hattrick Corp. is a wholly owned, parent-founded subsidiary of Bobby Inc. The unconsolidated statements of income and the statement of changes of retained earnings for the two companies for the year ended December 31, 20X6, are as follows (in 000s):
Statements of Income and Retained Earnings
Year Ended December 31, 20X6 Bobby $\quad$$\quad$ Hattrick Revenues:
$\begin{array}{l}\text { Sales }&\$265,000&\$121,000\\\text { Interest, dividend, \& lease income }&13,000&600\\&278,000&121,600\end{array}$ Expenses:
$\begin{array}{lll}\text { Cost of goods sold }&133,000&63,000\\\text { Amortization expense } & 26,000 & 11,600 \\\text { Administrative expense } & 39,000 & 13,000 \\\text { Income taxexpense } & 17,800 & 11,700 \\\text { Other expenses } & 12,900 & \underline{400}\\&228,700&99,700\\\text { Net income }&49,300&21,900\\\text { Retained earnings, January } 1,20X6&19,200&15,200\end{array}$ $\begin{array}{lll}\text {Dividends declared }&(13,300)&(10,000)\\\text {Retained earnings, December \( 31,20X6 \) }&\$55,200&\$27,100\\\end{array}$ Additional information:
• Bobby sells some of its output to Hattrick. During 20X6, intercompany sales amounted to $25,000,000, all of which had been sold by Hattrick to outside customers by year-end. Hattrick has accounts payable owing to Bobby for $200,000 at December 31, 20X6.
• Bobby owns the land on which Hattrick's building is located. Bobby leases the land to Hattrick for $30,000 per month.
• Bobby accounts for its investment in Hattrick under the cost method
Assume that Bobby is a private corporation that reports under ASPE. Prepare the statement of income and retained earnings for Bobby for the year 20X6 using the equity method.

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