Remburn Inc. Inc. purchased 90% of the outstanding voting shares of Stanton Inc. for $90,000 on January 1, 2015. On that date, Stanton Inc. had common shares and retained earnings worth $30,000 and $20,000, respectively. The equipment had a remaining useful life of 10 years from the date of acquisition. Stanton's trademark is estimated to have a remaining life of 5 years from the date of acquisition. Stanton's bonds mature on January 1, 2035. The inventory was sold in the year following the acquisition. Both companies use straight line amortization, and no salvage value is assumed for assets. Remburn Inc. and Stanton Inc. declared and paid $12,000 and $4,000 in dividends, respectively during the year.
The balance sheets of both companies, as well as Stanton's fair values on the date of acquisition are shown below: Cash Accounts Receivable Inventory Investment in Stanton Inc. Equipment (net) Land Trademark Total Assets Current Liabilities Bonds Payable Common Shares Retained Earnings Total Liabilities and Equity (carry ing value) $400,000$240,000$60,000$90,000$160,000$950,000$500,000$120,000$200,000$130,000$950,000 (carrying value) $5,000$30,000$30,000$25,000$20,000$10,000$120,000$50,000$20,000$30,000$20,000$120,000 (fair value) $5,000$30,000$50,000$20,000$30,000$15,000$50,000$30,000 The following are the financial statements for both companies for the fiscal year ended December 31, 2015:
Income Statements
Sales Dividend income Less: Expenses: Cost of Goods Sold Depreciation Interest Expense Other Expenses Gain on Sale of Land Net Income $295,750$3,600$200,000$10,000$16,000$5,000$−$68,350$125,000$19,000$25,000$36,000$28,000$(8,000)$25,000 Retained Earnings Statements
Balance, J anuary 1, 2015 Net Income Dividends Balance, Dec ember 31, 2015 $130,000$68,350$(12,000)$186,350$20,000$25,000$(4,000)$41,000 Balance Sheets
Cash Accounts Receivable Investment in Stanton Inc. Inventory Equipment (net) Trademark Total Assets Current Liabilities Bonds Pay able Common Shares Retained Earnings Total Labilities and Equity Rembum Inc $190,950$200,000$90,000$100,000$350,000$930,950$424,600$120,000$200,000$186,350$930,950 Stanton Inc. $156,000$150,000$30,000$25,000$10,000$371,000$280,000$20,000$30,000$41,000$371,000 Both companies use a FIFO system, and Stanton's entire inventory on the date of acquisition was sold during the following year. During 2015, Stanton Inc. borrowed $20,000 in cash from Remburn Inc. interest free to finance its operations. Remburn uses the Cost Method to account for its investment in Stanton Inc. Moreover, Stanton sold all of its land during the year for $18,000. Goodwill impairment for 2015 was determined to be $7,000. Remburn has chosen to value the non-controlling interest in Stanton on the acquisition date at the fair value of the subsidiary's identifiable net assets (parent company extension method).
-Prepare a consolidated balance sheet for Remburn Inc. as at December 31, 2015.
Definitions:
Behavioral Style
An individual's typical mode of responding or behaving across different situations; their characteristic manner of acting, reacting, and interacting.
Difficult
Characterized by challenges or obstacles that make a task hard to accomplish.
Chess and Thomas
Refers to Stella Chess and Alexander Thomas, developmental psychologists known for their research on temperament in children.
Goodness of Fit
A concept in psychology that explains how well an individual's temperament matches with their environment, affecting their development and behavior.