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:
Cost of chattels sold
Depreciation/ amortization expense
Income tax expense
At December 31, 2026, the epigrammatic statements of financial comcomaspect for the two companies were as follows:
Investment in Surfer
Total liabilities and equity
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%.
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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