Answer Happy

Financial statements of Par Corp. and its subsidiary Star Inc. on December 31, Year 12, are shown below: BALANCE SHEETS At December 31, Year 12 Par Star Cash $ 61,000 $ 3,100 Accounts receivable 121,000 106,000 Inventories 83,880 69,000 Land 51,000 91,000 Plant and equipment 560,000 910,000 Accumulated depreciation (201,000) (321,000) Investment in Star common shares 238,000 $ 913,880 $ 858,100 Accounts payable $ 100,400 $ 201,000 Accrued liabilities 10,100 14,200 Preferred shares 71,000 Common shares 450,000 200,000 Retained earnings 353, 380 371,900 $ 913,880 $ 858,100 RETAINED EARNINGS STATEMENTS For the Year Ended December 31, Year 12 Par Star Balance, January 1 $348, 380 $444,900 Net income (loss) 35,000 (32,000) 383,380 412,900 Dividends (30,000) (41,000) Balance, December 31 $353,380 $371,900

Par to Star Star to Par $ 400,000 393,000 During Year 12, Par billed Star $2,000 per month in management fees. At year-end, Star had paid for all months except for December. The January 1, Year 12, inventories of the two companies contained unrealized intercompany profits as follows: Inventory of Par Inventory of Star $ 35,000 34,000 The December 31, Year 12, inventories of the two companies contained unrealized intercompany profits as follows: Inventory of Par Inventory of Star $ 56,000 58,000

Required: (a) Prepare, with all necessary calculations, the following: (i) Year 12 consolidated retained earnings statement. (Input all amounts as positive values. Omit $ sign in your response.) Par Corp. Consolidated Retained Earnings Statement Year Ended December 31, Year 12 Balance January 1 $ Net loss Dividends Balance December 31

(ii) Consolidated balance sheet as at December 31, Year 12. Par Corp. Consolidated Balance Sheet as at December 31, Year 12 Assets $ 0 Liabilities and Equity $ 0

(b) How would the return on equity attributable to Par's shareholders for Year 12 change if Star's preferred shares were non-cumulative instead of cumulative? No Change O Change (c) On January 1, Year 13, Star issued common shares for $100,000 in cash. Because Par did not purchase any of these shares, Par's ownership percentage declined from 70 to 56%. Calculate the gain or loss that would be charged or credited to consolidated shareholders' equity as a result of this transaction. (Input all amounts as positive values. Round intermediate calculations and final answer to nearest dollar amount. Omit $ sign in your response.) (Click to select) $