Balance Sheets
December 31, 20X3
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|
GreenTower
Ltd.
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BlueLoft
Ltd.
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|
Assets:
|
|
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Current assets:
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|
|
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Cash
|
mce_markernbsp; 156,000
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mce_markernbsp; 143,000
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|
Accounts receivable
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195,000
|
175,500
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|
Inventory
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312,000
|
253,500
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|
Total current assets
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663,000
|
572,000
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Land
|
923,000
|
-
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Equipment
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897,000
|
1,183,000
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Accumulated amortization
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(663,000)
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(416,000)
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|
Investment in Blue Loft
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1,409,200
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-
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|
Goodwill*
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98,800
|
__-____
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|
Total assets
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3,328,000
|
1,339,000
|
|
Liabilities and shareholders' equity:
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|
|
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Liabilities:
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|
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Accounts payable
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184,600
|
78,000
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Bonds payable
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780,000
|
260,000
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Total liabilities
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964,600
|
338,000
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Shareholders' equity:
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|
|
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Common shares
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650,000
|
325,000
|
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Retained earnings
|
1,713,400
|
676,000
|
|
Total shareholders' equity
|
2,363,400
|
1,001,000
|
|
Total liabilities and shareholders' equity
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$3,328,000
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$1,339,000
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*from an acquisition prior to Blue Loft
Income Statements
Year Ended December 31, 20X3
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GreenTower
Ltd.
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BlueLoft
Ltd.
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Sales revenue
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$1,560,000
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$1,283,100
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Cost of goods sold
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1,040,000
|
845,000
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|
520,000
|
438,100
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Gain on sale of land
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___-___
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273,000
|
|
|
520,000
|
711,100
|
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Operating expense
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305,500
|
464,100
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Net income
|
214,500
|
247,000
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Statements of Retained Earnings
Year Ended December 31, 20X3
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Green Tower
Ltd.
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BlueLoft
Ltd.
|
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Retained earnings, December 31, 20X2
|
$1,498,900
|
$ 429,000
|
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Net income
|
214,500
|
247,000
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Retained earnings, December 31, 20X3
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$1,713,400
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$ 676,000
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Blue Loft Ltd.
Carrying and Fair Values
January 1, 20X2
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|
Carrying
Value
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Fair
Value
|
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Cash
|
mce_markernbsp; 104,000
|
mce_markernbsp; 104,000
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|
Accounts receivable
|
128,700
|
128,700
|
|
Inventory
|
231,400
|
253,500
|
|
Land
|
650,000
|
811,000
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Equipment
|
390,000
|
151,000
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Accumulated amortization
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(260,000)
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|
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Accounts payable
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91,000
|
91,000
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Bonds payable
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260,000
|
260,000
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Common shares
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325,000
|
-
|
|
Retained earnings
|
568,100
|
-
|
On January 1, 20X2, Green Tower Ltd. acquired all the outstanding common shares of Blue Loft Ltd. for $1,409,200 cash. - At December 31, 20X2, Green Tower's inventory included goods that it had purchased from Blue Loft for $58,500. The intercompany profit on these goods was $15,600. All these goods were sold to third parties in 20X3.
- During 20X3, Green Tower purchased goods from Blue Loft for $195,000. Blue Loft earned a gross profit of $65,000 on this sale. At December 31, 20X3, Green Tower still had 40% of these goods in its inventory.
- During 20X3, Green Tower sold goods to Blue Loft for $507,000. Green Tower earned a gross profit of $117,000 on this sale. At December 31, 20X3, Blue Loft still had 20% of these goods in its inventory.
- In December, 20X3, Blue Loft sold a tract of land to Green Tower for $923,000. Blue Loft had purchased the land 8 years ago for $650,000.
- At the time of Green Tower's acquisition, Blue Loft's equipment had a remaining estimated useful life of 3 years. Blue Loft uses the straight-line method of amortization, with no residual value.
Required:
Prepare the consolidated financial statements for 20X3 using the direct method.