The Financial Statements of Plax Inc Retained Earnings Statements Balance Sheets

question 45

Essay

The financial statements of Plax Inc. and Slate Corp for the year ended December 31, 2018 are shown below:
Income Statements $\begin{array}{|l|l|l|} \hline& \text { Plax Inc. } & \text { Slate Corm } \\\hline \text { Miscellaneous Revenues } & \$ 1,300,000 & \$ 400,000 \\\hline \text { Interest Revenues } & \$ 11,250 &- \\\hline \text { Dividend Revenue } & \$ 15,000 & -\\\hline \text { Less: Expenses } & & \\\hline \text { Miscellaneous Expense } & \$ 864,000 & \$ 259,200 \\\hline \text { Interest Expense } & & \$ 19,400 \\\hline \text { Income Tax Expense } & \$ 198,000 & \$ 48,000 \\\hline \text { Net Income } & \$ 264,250 & \$ 73,400 \\\hline\end{array}$ Retained Earnings Statements
$\begin{array}{|l|l|l|}\hline & \text { Plax Inc. } & \text { Slate Com } \\\hline \text { Balance, J anuary 1, 2018 } & \$ 490,000 & \$ 180,000 \\\hline \text { Net Income } & \$ 264,250 & \$ 73,400 \\\hline \text { Less: Div idends } & \$(126,000) & (\$ 20,000) \\\hline \text { Retained Earnings } & \$ 628,250 & \$ 233,400 \\\hline & & \\\hline\end{array}$ Balance Sheets
$\begin{array}{l|l|l|} \hline& \text { Plax Inc. } & \text { State Corp } \\\hline \text { Miscellaneous Assets } & \$ 1,210,000 & \$ 745,200 \\\hline \text { Investment in Slate Shares } & \$ 196,000 & -\\\hline \text { Investment in Slate Bonds } & \$ 122,250 &- \\\hline \text { Total Assets } & \$ 1,528,250 & \$ 745,200 \\\hline\\\hline \text { Miscellaneous Liabilities } & \$ 600,000 & \$ 150,000 \\\hline \text { Bonds Pay able } &- & \$ 200,000 \\\hline \text { Bond Premium } &- & \$ 1,800 \\\hline \text { Common Shares } & \$ 300,000 & \$ 160,000 \\\hline \text { Retained Earnings } & \$ 628,250 & \$ 233,400 \\\hline \text { Total Liabilities and Equity } & \$ 1,528,250 & \$ 745,200 \\\hline\end{array}$ Other Information:
> Plax acquired 75% of Slate on January 1, 2014 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2015 and 2018 respectively.
> Plax uses the cost method to account for its investment.
> Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2021. The bonds were issued at a premium. On January 1, 2018 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.
> On January 1, 2018, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.
> Both companies are subject to a 40% tax rate.
> Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated financial statements are prepared.
-Prepare a summary of intercompany interest revenues and expenses.

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Definitions:

Unions

Organizations formed by employees to negotiate collectively with employers over wages, benefits, working conditions, and the rights of workers.

Worker Control

The concept or practice where workers have decision-making power in the management and operations of the workplace.

Collective Bargaining

The practice of negotiating labor contracts that cover a range of workplace conditions and compensations between unions and employers on behalf of the employees.

Governance System

A structure or framework for managing, governing, or controlling a company, organization, country, or system.