The Following Information Pertains to Questions

question 2

Essay

The following information pertains to questions
Brand X Inc.purchased a controlling interest in Brand Y Inc.for $200,000 on January 1,2001.On that date,Brand Y Inc had common stock and retained earnings worth $180,000 and $20,000,respectively.Goodwill is tested annually for impairment.At the date of acquisition,Brand Y's assets and liabilities were assessed for fair value as follows: The Balance Sheets of Both Companies,as at December 31,2001 are disclosed below: The net incomes for Brand X and Brand Y for the year ended December 31,2001 were $1,000 $48,000 respectively.An impairment test conducted on December 31,2001 revealed that the Goodwill should actually have a value $2,000 lower than the amount computed on the date of acquisition.Both companies use a FIFO system,and Brand Y's inventory on the date of acquisition was sold during the year.Brand X did not declare any dividends during the year.However,Brand Y paid $51,000 in dividends to make up for several years in which the company had never paid any dividends.Brand Y's equipment and patent have useful lives of 10 years and 6 years respectively from the date of acquisition.All bonds payable mature on January 1,2006.
-Prepare Brand X's Consolidated Balance Sheet as at December 31,2001,assuming that Brand X purchased 100% of Brand Y for $350,000.

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