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Pro Inc. $($Pro$)$ acquired $75\%$ of Snap Corporation $($Snap$)$ on January $1,2019$ for $$217,500,$ when

Snap's retained earnings were $$80,000$ and the acquisition differential was attributable entirely

to goodwill. There were impairment losses to the goodwill of $$6,400$ and $$1,600$ in $2020$ and

$2023,$ respectively. Pro uses the cost method to account for its investment.

The financial statements of Pro and Snap for the year ended December $31,2023$ are shown

below: Income Statements

$\backslash$table$[[,$Pro Inc,Snap Corporation$],[$Miscellaneous revenues,$$1,300,000,$$$400,000],[$Interest revenues,$11,250,],[$Dividend revenue,$15,000,],[$Less: expenses,,$],[$Miscellaneous expense,$864,000,259,200],[$Interest expense,,$19,400],[$Income tax expense,$198,000,48,000],[$Net income,$$264,250,$$$73,400]]$

Retained Earnings Statements

$\backslash$table$[[,$Pro Inc,Snap Corporation$],[$Balance$,$ January $1,2023,$$$490,000,$$$180,000],[$Net income,$264,250,$$$73,400],[$Less: dividends,$-126,000,-20,000],[$Balance$,$ December $31,2023,$$$628,250,$$$233,400]]$

Balance Sheets

$\backslash$table$[[,$Pro Inc,Snap Corporation$],[$Miscellaneous assets,$$1,210,000,$$$745,200],[$Investment in Snap shares,$217,500,$dots$-----],[$Investment in Snap bonds,$122,250,$dots$------],[$Total assets,$$1,549,750,$$$745,200],[$Miscellaneous liabilities,$$621,500,$$$150,000],[$Bonds payable,,$200,000],[$Bond premium,,$1,800],[$Common shares,$300,000,160,000],[$Retained earnings,$628,250,233,400],[$Total liabilities and equity,$$1,549,750,$$$745,200]]$ Snap has $10\%$ par value bonds outstanding in the amount of $$200,000$ which mature on

December $31,2026.$ The bonds were issued at a premium. On January $1,2023,$ the unamortized

premium amounted to $$2,400.$ Snap uses the straight line method to amortize the premium.

On January $1,2023,$ Pro acquired $$120,000$ face value of Snap's bonds for $$123,000.$ Pro also

uses the straight line method to amortize any bond premium or discount.

Both companies are subject to a $40\%$ tax rate.

Gains and losses from intercompany bond holdings are to be allocated to the two companies

when consolidated financial statements are prepared. b$.$ Prepare a summary of intercompany bond transactions including the gain or loss for each

company $($before$-$ tax$)$ as well as the effect on the consolidated entity. $(5$ marks$)$

c$.$ Prepare a summary of the intercompany interest revenues and expenses $($before$-$tax$).(5$

marks$)$

d$.$ Prepare a detailed calculation of consolidated net income for $2023.(10$ marks$)$

e$.$ Prepare Pro's consolidated income statement for the year ended December $31,2023.$ Show

the allocation of consolidated net income between the controlling and noncontrolling

shareholders. $(15$ marks$)$i$.$ Prepare a calculation of noncontrolling interest as at December $31,2023.(10$ marks$)$

j$.$ Prepare Pro's Consolidated Balance Sheet as at December $31,2023.(10$ marks$)$

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