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PART C:

(1) On January 1, 2018, Panorama Company acquired 80% of Scann Corporation for $6,400,000.

At the time of the acquisition, the book value of Scann's assets and liabilities was equal to the fair value except for equipment that was undervalued $80,000 with a four-year remaining useful life and inventories that were undervalued $20,000 and sold in 2018. Panorama separate net income in 2018 and 2019 was $1,100,000 and $1,150,000, respectively. Scann separate net income in 2018 and 2019 was $300,000 and $360,000, respectively. Dividend payments by Scann in 2018 and 2019 were $60,000 and $60,000, respectively

Required : Using equity method,

1) Calculate Investment in Scann shown on Panorama's ledger at December 31, 2018 and 2019.

2) Calculate Investment in Scann shown on the consolidated statements at December 31, 2018 and 2019.

3) Calculate consolidated net income for 2018 and 2019.

4) Calculate Noncontrolling interest balance on Panorama's ledger at December 31, 2018 and 2019.

5) Calculate Noncontrolling interest balance on the consolidated statements at December 31, 2018 and 2019.

(Support your answer in all points with detailed calculations and explanation) (15 Marks)

(2) The consolidated income statement for POP Industries and its 75% Subsidiary, SAS at the end of 2019 was as follows: Consolidated sales $900,000 , Consolidated cost of Sales $500,000 Operating expenses $200,000, Noncontrolling interest share $25,000 ,and Controlling interest share $175,000.

After preparing the consolidated income statement, the accountants discovered that POP had sold inventory that cost $75,000 to SAS for $95,000, and SAS had sold inventory that cost $40,000 to POP for $58,000. Half of the products from both transactions still remained in inventory at December 31, 2019. These intercompany sales transactions had not been properly eliminated in consolidation.

Required: Prepare the consolidated income statement for POP and Subsidiary for 2019 after correcting these errors. (Support your answer with detailed Formulas, calculations and explanation) (15 Marks)

Question 1:

INVESTMENT IN SCANN Corporation 2018-2019
	Amount $
2018
Investment in Cash -Scann Corporation-Jan-2018	6,400,000
Add: - share in Adjusted Net Income for the year-2018 of Scann Corporation (260,000 X80%)	208,000
Less: - Dividend Received from Scann Corporation in 2018 (60000x80%)	(48,000)
Closing Balance as on 31 Dec-2018	6,560,000
2019
Opening Investment as on 01-01-2019	6,560,000
Add: - share in Adjusted Net Income for the year-2019 of Scann Corporation (340,000 X80%)	272,000
Less: - Dividend Received from Scann Corporation in 2019 (60000x80%)	(48,000)
Closing Balance as on 31 Dec-2019	6,784,000

Working
Adjusted Income of Scann Corporation	2018	2019
Net income for the year	300,000	360,000
Less: - Amortization of Equipment for the Year	(20,000)	(20,000)
Less: - Amortization of Inventory for the Year	(20,000)	-
Adjusted Net Income for the year	260,000	340,000
Amortization of Undervalued Amounts	2018	2019	Balance
Equipment (80000/4)	20,000	20,000	40,000
Inventory (20000) Sold in 2018	20,000	-	-
TOTAL	40,000	20,000	40,000

Part (2): Investment in Scann will not be shown in consolidated Balance sheet as it is the part of balance of Panorama Company only.

Part (3): Consolidated Net Income 2018-2019

Consolidated Net Income for 2018-2019
2018	Amount $
Net Income of Panorama company	1,100,000
Add: - Net Income of Scann Corporation	300,000
Less: - Adjustment in Net Income of scann Corporation (Depreciation & C.G.S will be charged)	(40,000)
Consolidated Net Income	1,360,000
2019	Amount $
Net Income of Panorama company	1,150,000
Add: - Net Income of Scann Corporation	360,000
Less: - Adjustment in Net Income of scann Corporation- (Depreciation will be Charged)	(20,000)
Consolidated Net Income	1,490,000

Part (4): NON-Controlling Balance on Panorama’s Ledger

NON-Controlling Interest for 2018-2019
2018	Amount $
Original share of NCI in Scann Assets (6,400,000/80000) x20	1,600,000
Add: - 20% share in Adjusted Income of scann Corporation (260,000X20%)	52,000
Less: - 20% Share in Dividend received (60,000 x20%)	(12,000)
Closing Balance of NCI as on 31-12-2018	1,640,000
2019	Amount $
Opening Balance as on 01-01-2019	1,640,000
Add: - 20% share in Adjusted Income of scann Corporation (340,000X20%)	68,000
Less: - 20% Share in Dividend received (60,000 x20%)	(12,000)
Closing Balance of NCI as on 31-12-2019	1,696,000

Part (5): The above same amounts will be shown in consolidated Balance Sheet & its share in Income will be shown in consolidated Income Statement In 2018-2019

Question 2:

Consolidated Income Statement of POP Industries
For the year Ended- 31st December-2019
		Before Correction	Adjustments	Corrected
Description		USD	USD	USD
Consolidated Sales		900,000	(153,000)	747,000
Consolidated Cost of Goods Sold		(500,000)	(134,000)	(366,000)
Gross Profit		400,000		381,000
Operating Expenses		(200,000)		(200,000)
Net Profit		200,000		181,000
Pop Share 75%		175,000	(16,750)	158,250
Non-Controlling Interest 25%		25,000	(2,250)	22,750

Working
Sales from POP to SAS (Parent to Subsidiary)		USD
Sales amount		95,000
cost of sales		(75,000)
Profit on Intra Company Sales		20,000
Un-Realized profit (Half Inventory in Stock)		10,000
will be less from POP Share in SAS Profit
Sales from SAS to POP ( subsidiary to Parent)		USD
Sales amount		58,000
cost of sales		(40,000)
Profit on Intra Company Sales		18,000
Un-Realized profit (Half Inventory in Stock)		9,000
Adjustment
75% POP Share in Profit of SAS		6,750
25% NCI Share in Profit of SAS		2,250

Adjustments Made in Consolidate Income Statement

Intra company sales will be deducted from consolidated Sales Amount (95000+58000)=153,000

Cost of Sales Will also be adjusted with Same amount

Total Un-Realized Profit Will be Added back in Cost of Sales

parent Company Un-realized Profit will be distributable to its 75% share only

Subsidiary un-realized profit will also be shared 25% to NCI & 75 % to Parent company