Module 5

Financial Accounting
Week 9
In-Class Problems

Chartered Professional Accountants of Canada, CPA Canada, CPA

are trademarks and/or certification marks of the Chartered Professional Accountants of Canada.
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Reproduced with permission of 2013 Institute of Chartered Accountants of Scotland and BPP Holdings Limited.
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Module 5 Financial Accounting

ICP #1
Dunn Ltd. acquired 100% of the ordinary share capital of Brad Ltd. on June 1, 2011. Brads
statement of financial position as at June 1, 2011, included net assets of $28.4 million.
The following information regarding Brad as at June 1, 2011, is available:

Property with a net book value of $5.2 million. A market value of $7.5 million.

Finished goods with a cost of $2.2 million and a sales value of $3.1 million. Selling costs
are 5% of the sales value.

$8 million face value with 5% bonds issued by Brad in 2001. The bonds have a carrying
value of $7.2 million and fair value of $6.452 million.

In preparation for the acquisition, Dunn had developed a plan to downsize Brads
operations at a cost of $1.6 million (mainly made up of severance payment). The plan was
announced on June 4, 2011, and full details were formalized in July 2011.

Brad had an unlisted investment in its statement of financial position at cost of $2.4 million.
Latest earnings of the company were $670,000, and the directors of Dunn believe that a
P/E ratio of 4.5 is appropriate for the company.

Brad had unrecognized ongoing research and development activities as at June 1, 2011. It
is estimated that these have a fair value of $0.8 million as at June 1, 2011. They are
considered to be separately identifiable.

Brad has guaranteed the borrowings of an associate. As it is estimated that there is only a
5% chance that the guarantee on the $10 million borrowings would be called upon, the
guarantee was included as a contingent liability of Brad as at June 1, 2011.

Dunn paid the following for Brads shares:

Cash
Common shares
3% bonds (2013)

2 / 19

$11,200,000
4 million (market value $5.20 each)
$5 million (market value of $2.419m)

Module 5 Financial Accounting

Week 9 In-Class Problems

Merchant bank and legal fees regarding the takeover equalled $480,000. Dunn will pay an
additional $2.5 million in cash on June 1, 2013. A discount rate of 6.2% is appropriate.
Required:
Calculate the fair value of the net assets acquired by Brad and the goodwill arising on
acquisition.
Solution to ICP #1
Dunn Ltd.:
Net assets acquired (000s)
Per financial statements as at June 1, 2011
Add: increase in fair value of property ($7.5 million 5.2 million)
Add: increase in fair value of finished goods (calculation 1)
Add: reduction in bond liability ($7.2 million $6.452 million)
Add: increase in value of investment (calculation 3)
Add: value of research and development
Less: value of contingent liability (5% $10 million)
Fair value of net assets at June 1, 2011

$28,400
2,300
745
748
615
800
(500)
$33,108

Goodwill calculation:
Cost (calculation 4)
FV of net assets acquired (as above)
Goodwill

$36,636
33,108
$ 3,528

Calculations:
(in 000s)
1.

Inventories
Selling price
Less: selling costs (5%)
Per financial statements
Increase

2.

3 / 19

$ 3,100
(155)
$ 2,945
2,200
$ 745

Downsizing
The conditions for recognition of the provision are not met. Therefore, it should not be
included as at the date of acquisition. Brad had no obligation at the date of acquisition,
and therefore no provision should be made.

Module 5 Financial Accounting

3.

4.

Unlisted investments
Cost
Valuation ($670,000 4.5)
Increase in value

Week 9 In-Class Problems

$2,400
3,015
$ 615

Cost of investment
Cash on June 1, 2011
Additional consideration on June 1, 2013 [$2.5 million/(1.062)2]
Common shares (4 million $5.20)
3% bonds

$ 11,200
2,217
20,800
2,419
$ 36,636

Notes:
1. The bank and legal fees should not be included.
2. The additional cash is likely to be paid. It should be discounted to PV as it is not payable for
two years.

4 / 19

Module 5 Financial Accounting

Week 9 In-Class Problems

ICP #2
On January 1, 2012, the Karen Company acquired 100% of the outstanding shares of the Liza
Company in return for cash of $4,500,000. The statements of financial position of both
companies and the fair values of Lizas assets and liabilities on the date of acquisition
immediately after the purchase were as follows:

Cash
Inventories
Investment in Liza
Land
Building and equipment (net)

Accrued liabilities
Long-term debt
Common shares
Retained earnings

Karen Company
SFP
$ 500,000
2,500,000
4,500,000
2,250,000
5,575,000
15,325,000

Liza Company
SFP
$ 162,500
2,505,000

1,480,000
1,735,000
$5,882,500

Liza Company
fair values
$ 162,500
2,450,000

2,450,000
4,000,000
5,000,000
3,875,000
15,325,000

$ 475,000
1,490,000
2,675,000
1,242,500
$5,882,500

475,000
$1,705,000

1,700,000
2,000,000

On the acquisition date, the building and equipment of Liza had a remaining useful life of 10
years, and the long-term debt matures on June 30, 2014.
The statement of financial position and statement of comprehensive income of both Karen and
Liza Company as at December 31, 2013, are on the following page.

5 / 19

Module 5 Financial Accounting

Week 9 In-Class Problems

Revenues

Karen
$ 8,270,000

Liza
$1,317,500

COGS
Depreciation expense
Other expenses
Net income
Retained earnings, beginning
Dividends
Retained earnings, ending

4,485,000
557,500
395,000
2,832,500
5,575,000
105,000
$ 8,302,500

730,000
173,500
232,500
181,500
1,542,500
75,000
$1,649,000

Cash
Inventories
Investment in Liza
Land
Building and equipment (net)

$ 3,457,500
3,432,500
4,500,000
2,250,000
4,460,000
$18,100,000

$ 1,251,000
2,250,000

Accrued liabilities
Long-term debt
Common shares
Retained earnings

$ 555,000
1,490,000
2,675,000
1,649,000
$6,369,000

797,500
4,000,000
5,000,000
8,302,500
$18,100,000

1,480,000
1,388,000
$6,369,000

Notes: A goodwill impairment test as at December 31, 2013, establishes the value of the
goodwill in the Liza Company at $300,000.
Required:
Part A:
1. Calculate the acquisition differential and goodwill.
2. Prepare the consolidated statement of financial position on the date of acquisition.
Part B:
1. Prepare the acquisition differential amortization schedule for 2012 and 2013.
2. Prepare the consolidated statement of comprehensive income and statement of financial
position. Provide proof of the 2013 consolidated net income and the consolidated retained
earnings at December 31, 2013.

6 / 19

Module 5 Financial Accounting

Week 9 In-Class Problems

Solution to ICP #2
Part A:
1.
Purchase price
Book value of net assets acquired ($2,675,000 + 1,242,500)
Acquisition differential
Fair value allocations:
Inventories (2,450,000 2,505,000)
Land (1,700,000 1,480,000)
Building and equipment (2,000,000 1,735,000)
Long-term debt (1,705,000 1,490,000)
Goodwill

$4,500,000
3,917,500
$ 582,500

($55,000)
220,000
265,000
(215,000)

2.
Karen Company
Consolidated statement of financial position
January 1, 2012
Cash (500 + 162.5)
Inventories (2,500 + 2,505 55)
Land (2,250 + 1,480 + 220)
Building and equipment (net) (5,575 + 1,735 + 265)
Goodwill (+367.5)

$ 662,500
4,950,000
3,950,000
7,575,000
367,500
17,505,000

Accrued liabilities (2,450 + 475)

Long-term debt (4,000 + 1,490 + 215)
Common shares
Retained earnings

2,925,000
5,705,000
5,000,000
3,875,000
17,505,000

7 / 19

215,000
$367,500

Module 5 Financial Accounting

Week 9 In-Class Problems

Part B:
1. Fair value differential amortization / goodwill impairment schedule:

Inventories
Land
Building and equipment
Long-term debt
Goodwill

At
acquisition
Jan. 1
($55,000)
220,000
265,000
(215,000)
367,500
$582,500

Amortization
Amortization
2012
2013
$55,000

(26,500)
(26,500)
86,000
86,000

(67,500)
$114,500
($8,000)

Balance
Dec. 31

$220,000
212,000
(43,000)
300,000
$689,000

2.
Karen Company
Consolidated statement of comprehensive income
For the year ended December 31, 2013
Revenues (8,270 + 1.317.5 75 dividend of Liza)
COGS (4,485 + 730)
Depreciation expense (557.5 + 173.5 + 26.5 amort of AD)
Other expenses (395 + 232.5 86 amort of AD)
Goodwill impairment (67.5)
Net income and comprehensive income

$ 9,512,500
(5,215,000)
(757,500)
(541,500)
(67,500)
$ 2,931,000

Karen Company
Consolidated statement of retained earnings*
For the year ended December 31, 2013
Beg. retained earnings (Note 1)
Net earnings
Less: dividends
Ending retained earnings
Note 1:
Beginning retained earnings of Karen Company
R/E of Liza Jan. 1/13
$1,542,500
R/E of Liza acquisition
(1,242,500)
Post acquisition increase
$ 300,000
+/ Amort. of AD to date
114,500
Beginning consolidated retained earnings

8 / 19

5,989,500
2,931,000
(105,000)
$ 8,815,500

$ 5,575,000

414,500
$ 5,989,500

Module 5 Financial Accounting

Week 9 In-Class Problems

* As noted in Week 1, under IFRS, companies cannot continue to use the statement of
retained earnings and/or combine it with the statement of comprehensive income. Entities are
now required to show a separate statement of changes in equity that reconciles the opening
balance of each major category of shareholders equity (and in total) to the ending balance for
the year. Given the basic nature of the equity section in the ICPs, the term retained earnings
will be used for illustrative purposes.
Karen Company
Consolidated statement of financial position
December 31, 2013
Assets:
Cash (3,457.5 + 1,251)
Inventory (3,432.5 + 2,250)
Investment in Liza (4,500 4,500)
Land (2,250 + 1,480 + 220)
Building and equip net (4,460 + 1,388 + 212)
Goodwill (367.5 67.5)
Total

$ 4,708,500
5,682,500

3,950,000
6,060,000
300,000
$ 20,701,000

Liabilities and shareholders equity:

Accrued liabilities (797.5 + 555)
Long-term debt (4,000 + 1,490 + 43)
Common shares (5,000 only Karen)
Retained earnings (per above and see Note 2)
Total

$ 1,352,500
5,533,000
5,000,000
8,815,500
$ 20,701,000

Proof of 2013 consolidated net income:

Karens net income
Dividends received from Liza
Lizas net income
Amortization of fair value differential / goodwill impairment

Proof of consolidated R/E as at Dec. 31/13:

Karen retained earnings, December 31, 2013
Liza retained earnings, December 31, 2012
Liza retained earnings, January 1, 2012
Post-acquisition increase in retained earnings
Amortization of acquisition differential to date
Consolidated retained earnings

9 / 19

$2,832,500
(75,000)
$ 181,500
(8,000)

173,500
$2,931,000

$8,302,500
$1,649,000
1,242,500
$ 406,500
106,500

513,000
$8,815,500

Module 5 Financial Accounting

Week 9 In-Class Problems

ICP #3
On December 31, 2012, Patricia Inc. purchased 60% of the outstanding voting shares of Sara
Corp. for $1,800,000 in cash. The net assets of Sara were $2,250,000 ($2,000,000 common
shares plus $250,000 retained earnings), and Saras identifiable assets and liabilities with
differences between book and fair values were as follows:
Inventories
Plant and equipment (net)
Long-term liabilities

December 31, 2012

1,250,000
1,750,000
1,000,000

Fair values
1,125,000
2,000,000
900,000

On the date of purchase, Saras plant and equipment has an estimated useful life of 10 years,
while the long-term liabilities on that date mature on December 31, 2015. Patricia and Sara
both use the straight-line method of amortization.
The statements of comprehensive income for the year ending December 31, 2014, and the
statements of financial position as at December 31, 2014, of the Patricia and Sara companies
are as follows:
Statements of comprehensive income
For the year ending December 31, 2014

Sales
Other revenues
Cost of goods sold
Depreciation expense
Other expenses
Net income

10 / 19

Patricia
$6,250,000
250,000
6,500,000
3,000,000
1,000,000
2,000,000
6,000,000
$500,000

Sara
$3,250,000
75,000
3,325,000
1,875,000
625,000
450,000
2,950,000
$ 375,000

Module 5 Financial Accounting

Week 9 In-Class Problems

Statements of financial position

As at December 31, 2014

Cash
Accounts receivable
Inventories
Investment in Sara
Plant and equipment (net)

Current liabilities
Long-term liabilities
Common stock
Retained earnings

Patricia
$ 250,000
1,075,000
2,875,000
1,800,000
5,375,000

Sara
$ 175,000
450,000
1,000,000

2,125,000

$11,375,000

$3,750,000

$ 750,000
2,500,000
2,500,000
5,625,000

$ 100,000
1,000,000
2,000,000
650,000

$11,375,000

$3,750,000

Other information:
1. Dividends paid during 2014:
Patricia declared and paid $250,000.
Sara declared and paid $100,000.
2. At year-end, Sara still owes Patricia for $62,500 consulting fees earned during 2014.
3. It is the policy of Patricia to measure NCI based on a value using the imputed purchase
price.
4. Goodwill was tested for impairment in both 2013 ($40,000 of impairment) and 2014
($50,000 of impairment).
Required:
1. Prepare a consolidated statement of comprehensive income and a reconciliation of
retained earnings for the year ended December 31, 2014.
2. Provide a proof of the ending consolidated retained earnings balance.
3. Prepare the consolidated statement of financial position as at December 31, 2014.
4. Provide a reconciliation of the non-controlling interest statement of financial position
account from the opening balance to the ending balance.

11 / 19

Module 5 Financial Accounting

Week 9 In-Class Problems

Solution to ICP #3
1.

Purchase price imputed at 100%: $1,800,000 / 0.6

Net assets acquired
Acquisition differential
Allocation
Inventories
Plant and equipment
Long-term liabilities
Goodwill

$3,000,000
2,250,000
750,000
(125,000)
250,000
100,000

225,000
$525,000

Acquisition differential amortization schedule

Inventories
Plant and equipment:
(10 yrs)
Long-term liabilities:
(3 yrs)
Goodwill

At acquisition
Dec. 31,
2012
($125,000)
250,000

Amortization
2013
$125,000
(25,000)

2014

($25,000)

Balance
Dec. 31,
2014

$200,000

100,000

(33,333)

(33,333)

33,334

525,000
$750,000

(40,000)
$26,667

(50,000)
($108,333)

435,000
$668,334

Consolidated retained earnings Jan. 1, 2014

Patricias R/E ($5,625,000 500,000 + 250,000)
Saras R/E ($650,000 375,000 + 100,000)
Less R/E at acquisition
Post-acquisition increase in R/E
Amortization of FV Increments
Subtotal
Patricias % ownership
Consolidated R/E Jan. 1, 2014

12 / 19

$5,375,000
$375,000
250,000
125,000
26,667
151,667
60%

91,000
$5,466,000

Module 5 Financial Accounting

Week 9 In-Class Problems

Consolidated statement of comprehensive income

For the year ended December 31, 2014
Sales ($6,250,000 + 3,250,000)
Other revenues (250,000 + 75,000 62,500 fees
60,000 dividends from Sara)
Cost of goods sold (3,000,000 + 1,875,000)
Depreciation (1,000,000 + 625,000 + 25,000 FV)
Other expenses (2,000,000 + 450,000 + 33,333 FV 62,500
fees
)
Goodwill impairment loss
Net income and comprehensive income
Attributed to:
Equity holders of Patricia (see below)
Non-controlling interest: $266,667 40%

Income attributed to the equity holders of Patricia:

Patricias income
Less dividends from Sara
Saras income
Amortization of FV increments
Subtotal
Patricias % ownership
Consolidated NI attributable to Patricias
equity holders

$9,500,000
202,500
(4,875,000)
(1,650,000)
(2,420,833)
(50,000)
$ 706,667

$ 600,000
106,667
$ 706,667

$ 500,000
(60,000)
$375,000
(108,333)
266,667
60%

160,000
$ 600,000

Consolidated statement of retained earnings*

For the year ended December 31, 2014
Consolidated retained earnings, beg. of year
Income for the year Patricia
Dividends Patricia paid
Consolidated retained earnings, end of year
* See note in ICP #2 regarding statement of retained earnings.

13 / 19

$5,466,000
600,000
(250,000)
$5,816,000

Module 5 Financial Accounting

2.

3.

4.

14 / 19

Patricias R/E
Saras R/E
Less: Saras R/E at acquisition
Saras post-acquisition increase in R/E
Amortization of FV incr (108,333 26,667)
Subtotal
Patricias % ownership
Consolidated retained earnings Dec. 31, 2014

Week 9 In-Class Problems

$5,625,000
$650,000
250,000
400,000
(81,666)
318,334
60%

191,000
$5,816,000

Consolidated statement of financial position

As at December 31, 2014
Cash (250,000 + 175,000)
Accounts receivable (1,075,000 + 450,000 62,500 fees)
Inventories (2,875,000 + 1,000,000)
Plant and equipment (5,375,000 + 2,125,000 + 200,000 FV)
Goodwill (525,000 40,000 50,000)
Total assets

$425,000
1,462,500
3,875,000
7,700,000
435,000
$13,897,500

Current liabilities (750,000 + 100,000 62,500 fees)

Current portion of long-term liabilities (1,000,000 33,334 FV)
Long-term liabilities
Common stock
Retained earnings
NCI (2,650,000 + 668,334) 40%
Total liabilities and shareholders equity

$787,500
966,666
2,500,000
2,500,000
5,816,000
1,327,334
$13,897,500

NCI, beg of year ($2,000,000 common stock + 375,000 R/E beg +

776,667 unamortized FV beg) 40%
NCI in Saras income
Dividends paid to NCI: $100,000 40%
NCI, end of year

$1,260,667
106,667
(40,000)
$1,327,334

Module 5 Financial Accounting

Week 9 In-Class Problems

ICP #4
Protect Company purchased 76% of the outstanding common shares of Secure Company on
December 31, 20X7, for $950,000. At that date, Secure had the following net assets:
Common shares
$300,000
Retained earnings $220,000
On the date of acquisition, all the assets and liabilities of Secure had fair values equal to their
carrying value except for the following:

Plant & equipment*

Bonds payable**

Book value
$300,000
$120,000

Fair value
$380,000
$140,000

* 10 years remaining useful life at acquisition date and no residual value.

** 5 years until maturity at acquisition date.
The financial statements for both companies as at December 31, 20X9, are as follows:

Cash
Accounts receivable
Inventories
Investment in Secure
Notes receivable Secure
Land
Plant and equipment (net)

Accounts payable
Bonds payable
Notes payable Protect
Common shares
Retained earnings

15 / 19

Statements of financial position

Protect
Secure
$ 50,000
$ 190,000
235,000
132,000
206,000
208,000
950,000
20,000
265,000
130,000
874,000
270,000
$2,600,000
$ 930,000
$ 200,000
610,000
900,000
890,000
$2,600,000

$ 65,000
120,000
20,000
300,000
425,000
$ 930,000

Module 5 Financial Accounting

Week 9 In-Class Problems

Statements of comprehensive income

Protect
$990,000
(570,000)
(31,000)
(55,000)
(175,000)
159,000

Revenues
Cost of goods sold
Interest expense
Depreciation expense
Other expenses
Net income

Secure
$623,000
(301,000)
(9,000)
(30,000)
(85,000)
198,000

Statements of retained earnings*

Retained earnings, beginning
Net income
Dividends declared
Retained earnings, ending

Protect
831,000
159,000
(100,000)
$ 890,000

Secure
247,000
198,000
(20,000)
$ 425,000

*As noted in Week 1, under /FRS, companies cannot continue to use the statement of retained
earnings and/or combine it with the statement of comprehensive income. Entities are now
required to show a separate statement of changes in equity that reconciles the opening
balance of each major category of shareholders' equity (and in total) to the ending balance for
the year. Given the basic nature of the equity section in the /CPs, the term "retained earnings"
will be used for illustrative purposes.
Other information:

During 20X9, Secure sold inventory to Protect for $50,000 that had a cost to Secure of
$30,000. At the end of 20X9, 25% of the inventory remained unsold by Protect and was
included in ending inventory.

During 20X9, Protect provided management services (included in revenues) to Secure

(included in other expenses) and invoiced Secure $10,000. At year-end, $2,000 of the
$10,000 remained unpaid by Secure and was included in regular payables and receivables.

On January 1, 20X9, Protect advanced $20,000 to Secure, and Secure signed a note with
no set terms for repayment but which indicated that interest of 5% would be due on
December 31 each year. The interest was paid by Secure on that date and Protect included
the receipt of interest in its revenues for the year.

Protect measures NCI based on a value using the imputed purchase price.

Impairment testing indicated that the goodwill for Secure was impaired by $70,000 at
December 31, 20X9.

16 / 19

Module 5 Financial Accounting

Week 9 In-Class Problems

Required:
1. Prepare a consolidated statement of income and a reconciliation of retained earnings for
the year ended December 31, 20X9.
2. Prepare the consolidated statement of financial position as at December 31, 20X9. (Also
prepare a reconciliation of the NCI to prove the ending balance on the statement of
financial position.)
Solution to ICP #4
1.

Purchase price imputed at 100%: $950,000/76%

Net assets acquired ($300,000 + 220,000)
Acquisition differential
Fair value allocations:
P&E
Bonds payable
Goodwill

$1,250,000
520,000
730,000
$80,000
(20,000)

60,000
$670,000

Amortization schedule for acquisition differential:

P & E (10 yrs)

B/P (5 yrs)
Goodwill

At acquisition
Dec. 31, 20X7
$80,000
(20,000)
670,000
$730,000

Amortization
20X8
20X9
(8,000)
(8,000)
4,000
4,000
(70,000)
(4,000)
(74,000)

Balance
Dec. 31, 20X9
$64,000
(12,000)
600,000
$652,000

Consolidated retained earnings Jan. 1, 20X9

Protects R/E
Secures R/E
Less R/E at acquisition
Post-acquisition increase in R/E
Amortization of acquisition differential
Subtotal
Protects % ownership
Consolidated R/E Jan. 1, 20X9

17 / 19

$831,000
$247,000
(220,000)
27,000
(4,000)
23,000
76%

17,480
$848,480

Module 5 Financial Accounting

Week 9 In-Class Problems

Consolidated statement of comprehensive income

For the year ended December 31, 20X9
Revenues ($990 + 623 15.2 dividends from Secure 50 internal sale
10 mgmt fees 1 interest on loan)
Cost of goods sold (570 + 301 50 internal sale +
5 unrealized profit)
Interest expense (31 + 9 4 AD 1 interest on loan)
Depreciation (55,000 + 30,000 + 8,000 AD)
Other expenses (175 + 85 + 70 GW impairmt 10 mgmt fees)
Net income and comprehensive income
Attributed to:
Equity holders of Protect (schedule)
Non-controlling shareholders: $119,000 24%

$1,536,800
(826,000)
(35,000)
(93,000)
(320,000)
$ 262,800

$ 234,240
28,560
$ 262,800

Calculations:
Interest on loan = 20,000 5% = 1,000
Unrealized profit = 25% (50,000 30,000) = 5,000
Profit attributed to the equity holders of Protect
Protect profit for the year
Less: dividends from Secure
Secure profit for the year
$198,000
Less: amortization of acquisition differential
(74,000)
Less: unrealized profit in inventory of Protect
(5,000)
Subtotal
119,000
Protects % ownership
76%
Consolidated NI attributable to Protects equity holders

$ 159,000
(15,200)

90,440
$ 234,240

Consolidated statement of retained earnings

For the year ended December 31, 20X9
Consolidated retained earnings, beginning of year
Protects net income for the year
Dividends paid by Protect
Consolidated retained earnings, end of year

18 / 19

$ 848,480
234,240
(100,000)
$ 982,720

Module 5 Financial Accounting

2.

Week 9 In-Class Problems

Consolidated statement of financial position

As at December 31, 20X9
Cash (50,000 + 190,000)
Accounts receivable (235,000 + 132,000 2,000 internal )
Inventories (206,000 + 208,000 5,000 unrealized profit)
Investment in Secure (950,000 950,000)
Notes receivable Secure (20,000 20,000)
Land (265,000 + 130,000)
P & E (874,000 + 270,000 + 64,000 AD)
Goodwill (670,000 70,000 GW impairment)
Total assets

$240,000
365,000
409,000

395,000
1,208,000
600,000
$3,217,000

Accounts payable (200,000 + 65,000 2,000 internal)

Bonds payable (610,000 + 120,000 + 12,000 AD)
Notes payable Protect (20,000 20,000)
Common stock
Retained earnings
NCI (725,000 + 652,000 unamort AD 5,000 unreaized profit) 24%
Total liabilities and shareholders equity

263,000
742,000

900,000
982,720
329,280
$3,217,000

Reconciliation of NCI:
NCI, beginning of year ($300,000 common stock
+ 247,000 retained earnings beg + 726,000 unamortized AD beg) 24%
NCI in Secures income
Dividends paid to NCI: $20,000 24%
NCI, end of year

19 / 19

$305,520
28,560
(4,800)
$329,280