Power Pro would like you to cover the options it has in using its borrowing abil

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Power Pro would like you to cover the options it has in using its borrowing ability an asset management experience in assisting Swift-Craft. There is a concern as to existin debt and with respect to funds needed to finance the new plant. Your discussion should co sider the impact of alternatives on the consolidation process and on NCI shareholders Case 5-2 Impact of Alternative Methods to Retire Subsidiary Deb Magna Company is the parent company that owns an 80% interest in Metros Compan The interest was purchased at book value, and the simple equity method is used to record the ownership interest. The trial balances of the two companies on December 31, 201 were as follows: Mogna Metros 258,000 50,000 316,000 800,000 300,000 40,000 100 Cash Other Current Assets Investment in Metros 200 500 200, (200,000! (285,000 130,000 Accumulated Depreciation... Bonds Payoble Common Stock (por) Retained Earnings.. 300,000 (100,000 (1 50,000) (170.00 746,000 Sales Cost of Goods Sold.... Expenses interest Expense Subsidiary Income 90,000 30,000 (8,000) 0 Totals As of December 31, 2016, Magna Company was consider ng he nterest ner. Based on a 12% current i $200,000 of Metros s 10% bonds from the currentow

Explanation / Answer

Proforma Consolidated Balance Sheet as on 31 Dec 2016 before bond adjustments

Proforma Consolidated Income statement for year ended 31 Dec 2016 Magna Metros Consolidated Sales 150000 170000 320000 Cost of Goods Sold -90000 -130000 -220000 Expenses -30000 -10000 -40000 Interest expense -20000 -20000 Net Profit 30000 10000 40000 Share of Minority Interest in profit (20% of 10,000) -2000 Consolidated Net Profit after minority interest 38000

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