Ridgemont acquired 90% of the common shares of Gourmand on January 1, 2009, at a cost of $150,750. At that date the equity of Gourmand was: Share capital (100,000 shares) …..$100,000 Retained earnings ……… 20,000 At January 1, 2009, all the identifiable assets and liabilities of Gourmand were at fair value except for the following assets: The inventory was all sold by December 31, 2009. Depreciable assets have an expected further five-year life, with depreciation being calculated on a straight-line basis. Ridgemont uses the partial goodwill method. On January 1, 2012, Gourmand acquired 25% of the capital of Primo for $3,500. All the identifiable assets and liabilities of Primo were recorded at fair value except for the following: All this inventory was sold in the 12 months after January 1, 2012. The depreciable assets were considered to have a further five-year life. Information on Primo’s equity position is as follows: For the year ended December 31, 2013, Primo recorded a profit before tax of $2,600 and an income tax expense of $600. Primo paid a dividend of $200 in June 2013. Ridgemont regards Primo as a joint venture. During the year ended December 31, 2013, Primo sold inventory to Gourmand for $6,000. The cost of this inventory to Primo was $4,000. Gourmand has resold only 20% of these items. However, Gourmand made a profit before tax of $500 on the resale of these items. On June 30, 2012, Gourmand sold Primo a motor vehicle for $4,000, at a profit before tax of $800 to Gourmand. Both companies treat motor vehicles as non-current assets. Both companies charge depreciation at 20% p.a. on cost straight line. Assume a tax rate of 30%. Information about income and changes in equity for Ridgemont and its subsidiary, Gourmand, for the year ended December 31, 2013, is as follows: Required (a) Prepare the consolidated statement of comprehensive income and statement of changes in equity of Ridgemont and its subsidiary Gourmand as at December 31, 2013. Ridgemont’s share capital is $100,000. (b) In the consolidated statement of financial position, what would be the balance of the investment in Primo as at December 31, 2013? View Solution:
Ridgemont acquired 90 of the common shares of Gourmand on