Advanced Financial Accounting

Comprehensive Consolidation Question

On December 31, 2021, Pokeman Limited purchased 60% of the uncollected settled shares of Surfer Company for $7,400,000 in specie. On merit era, the shareholders’ equity of Surfer consisted of $2,000,000 in settled shares and $4,000,000 in retained rights. 

Also on this era, Surfer had schedule delay a open treasure that was $200,000 close than its carrying treasure. In restitution, Surfer had equipment delay a open treasure that was $300,000 superior than its carrying treasure. The equipment had an estimated available society of 8 years on December 31, 2021. Surfer had an spoken Patent reprimand $120,000 and a available society of 6 years. Finally, Surfer’s desire account liabilities treasured at $100,000 close than the carrying (book) treasure. The LT Liabilities had a ten year account end in 2031. 

Each year, indistinct charity is tested for faintness. Charity had a treasure of $1,300,000 at December 31, 2025 and $1,000,000 at December 31, 2026. 

For the year ended December 31, 2026, the announcements of avail or damage for Pokeman and Surfer were as follows:  

Pokeman

Surfer

Sales 

$25,000,000 

12,500,000 

Other   Income

5,000,000 

1,000,000 

Total revenues

30,000,000 

13,500,000 

Cost   of chattels sold 

18,000,000 

8,200,000 

Depreciation/   amortization expense 

3,400,000 

1,800,000 

Other   expenses

4,200,000 

1,500,000 

Income   tax expense

1,100,000 

500,000 

Total expenses

26,700,000 

12,000,000 

Net pay 

3,300,000 

1,500,000 

At December 31, 2026, the epigrammatic   statements of financial comcomaspect for the two companies were as follows: 

Pokeman

Surfer

Current assets 

15,000,000

8,600,000

Non-current assets 

29,600,000

17,400,000

Investment in Surfer 

7,400,000

__________ 

Total assets 

52,000,000

26,000,000

Liabilities 

26,400,000

13,600,000

Common shares   

12,400,000

2,000,000

Retained   earnings 

13,200,000

10,400,000

Total liabilities and equity

52,000,000

26,000,000

Additional information:   

1. Intercompany sales of chattels are made to achieve a boundary of 30%

2. In 2025, Surfer sold goods to Pokeman for $500,000, of which Pokeman sold 60% to not allied third parties during 2025.  

3. During 2026, Surfer sold goods to Pokeman for $400,000, 75% of which scum in Pokeman’s schedule on December 31, 2026. 

4. In 2025, Pokeman sold goods to Surfer for $600,000; Surfer’s 2025 end schedule contained 40% of this schedule.

5. During 2026, Pokeman sold goods to Surfer for $750,000; Surfer’s 2026 end schedule contains 30% of this schedule. 

6. Surfer owes Pokeman $200,000 as of December 31, 2026 for schedule purchases. 

7. Pokeman provides skillful-treatment services for different projects operated by Surfer. For 2026, the whole charged was $20,000 per month for a sum of $240,000. Payments for these services are made on the 15th of the followingcited month. 

8. During 2026, Pokeman nominal and remunerated dividends of $1,600,000 timeliness Surfer nominal and remunerated dividends of $700,000. 

9. On January 1, 2023, Pokeman sold equipment to Surfer for $160,000. Pokeman had artificial the equipment on June 30, 2022 for $240,000 and had estimated a available society of 6 years. There were no changes made to the fostering available society when Surfer artificial the equipment. 

10. Also in 2023, Surfer sold a fragment of place to Pokeman at a avail of $120,000. Half of this place was sold in 2026 to an not allied third aspect. 

11. On July 1, 2026 Pokeman sold a fabric to Surfer for $500,000. The fabric had a net size treasure of $400,000 (following updating depreciation to the era of sale) on the sizes of Pokeman, delay a fostering available society of 5 years. 

12. Both companies possess an pay tax at the reprimand of 0%. 

Required:  

a) Prepare Pokeman’s indistinct announcement of avail or damage for the year ended and a announcement of financial comcomaspect as at December 31, 2026.

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