at the beginning of 20×2 dahl ltd acquired 8 of the outstanding common shares of tip 622396

At the beginning of 20X2, Dahl Ltd. acquired 8% of the outstanding common shares of Tippy Ltd. for $400,000. This amounted to 80,000 shares.
At the beginning of 20X4, Dahl acquired an additional 270,000 shares of Tippy for $1,512,000. At this acquisition date, Tippy’s shareholders’ equity consisted of the following:
4% non-cumulative preferred shares $1,000,000
Common shares, 1,000,000 outstanding shares 2,400,000
Retained earnings 2,160,000
At this acquisition date, the fair values of the net identifiable assets equalled their carrying values except for the following:
Excess of fair value
over carrying value

Inventory $ 96,000

Land 800,000

At the beginning of 20X5, Dahl acquired an additional 450,000 shares of Tippy for 2,880,000. The shares were trading for $6 per share. At this acquisition date, Tippy’s shareholders’ equity consisted of the following:

4% non-cumulative preferred shares $1,000,000
Common shares, 1,000,000 outstanding shares 2,400,000
Retained earnings 2,560,000
At this acquisition date, the fair values of the net identifiable assets equalled their carrying values except for the following:

Excess of fair value over/(under)
carrying value

Accounts receivable $W (48,000)
Building and equipment (net) 720,000

Long-term debt 160,000

The building and equipment have an estimated remaining life of 10 years and the long-term debt matures in 10 years.

The condensed separate-entity financial statements for December 31, 20X6 are as follows:

Balance Sheets

As at December 31, 20X6

	Dahl Ltd.	Tippy Ltd.
Assets:
Cash	$ 400,000	$ 560,000
Accounts receivable	1,920,000	440,000
Inventories	400,000	320,000
Land	4,400,000	800,000
Buildings and equipment (net)	8,488,000	7,200,000
Investment in Tippy (at cost)	4,792,000	____-____
Total assets	$ 20,400,000	$ 9,320,000
Liabilities:
Accounts payable	$ 2,400,000	$ 400,000
Long-term debt	3,200,000	1,600,000
Total liabilities	5,600,000	2,000,000
Shareholders’ equity:
4% non-cumulative preferred shares	–	1,000,000
Common shares	7,200,000	2,400,000
Retained earnings	7,600,000	3,920,000
Total shareholders’ equity	14,800,000	7,320,000
Total liabilities and shareholders’ equity	$ 20,400,000	$ 9,320,000

Income Statements

Year Ended December 31, 20X6

	Dahl Ltd.	Tippy Ltd.
Sales	$ 12,000,000	$ 7,200,000
Dividend income	96,000	–
Gain on sale of equipment	_______	168,000
Total revenue	12,096,000	7,368,000
Cost of goods sold	7,600,000	4,960,000
Operating expenses	2,374,400	944,000
Income tax expense	825,600	584,000
Total expenses	10,800,000	6,488,000
Net income	$ 1,296,000	$ 880,000

Additional information:

• Dahl and Tippy declared and paid dividends during 20X6 of $400,000 and $160,000, respectively.
• At the end of 20X5, the inventories of Dahl and Tippy included goods with intercompany profits of $68,000 and $152,000 respectively.
• During 20X6, Dahl sold goods to Tippy for $3,120,000 at a gross margin of 45%. At the end of 20X6, $200,000 of these goods were still in Tippy’s inventory.
• During 20X6, Tippy sold goods to Dahl for $2,080,000 at a gross margin of 35%. At the end of the year, $320,000 of these goods were still in Dahl’s inventory.
• On January 1, 20X6, Tippy sold some equipment to Dahl for $360,000. At that time, the equipment had a book value of $192,000 and an estimated remaining life of 8 years. Dahl has paid Tippy $252,000 and will pay the balance on January 31, 20X7.
• Both Dahl and Tippy use the straight-line method of amortization for their buildings and equipment.
• In 20X5, a goodwill impairment of $73,600 was recognized and a further impairment of $46,400 occurred in 20X6. Impairment losses are allocated 80% to Dahl and 20% to the non-controlling interest.
• Both companies are taxed at an average rate of 40%.

Required:

Calculate Dahl’s 20X6 consolidated net income and identify the amount attributable to Dahl’s shareholders and to the non-controlling interest. Be sure to show all your calculations. You are not required to prepare a consolidated income statement.