d r I h f subsidiary Corporation, 0 en January 1, 20X8? Parent Company a?uired 90 percent owners 1p
d r I h
f subsidiary Corporation,
0 en January 1, 20X8? Parent Company a?uired 90 percent owners 1p o
W VJ at underlying book value The fair value of the noncontrotling interest at the date of acquisition
was equal to 10 percent of the book value of Subsidiary Corporation On Mar 17, 20X8,
Subsidiary purchased inventory from Parent for $200,000 Subsidiary sold the 75% of the
inventory to an unaffiliated company for $250,000 on November 21, 20X8 Parent had produced
the inventory sold to Subsidiary for $150,000 The companies had no other transactions during
20X8
a) Bas?
d?? the information given above, what amountofRe¥en? will be reported in the 20X8
£Onsoliaa?a’trf?me statement? (3pts)
b) Based on the infonn
20X8 consolidated inco
·on given above, what amount of cost of goods sold will be reported in the
statement? (3pts)
tion given above, what amount of consolidated net income will be assigned to
controlling shareholders XS? (4pts)
Based on the informa
2- Perth Corporation ?cent of Dundee Company’s stock At :nd f 20X8, Perth and
Dundee reported the following partial operating results and inventory balances:
Total sales
Sales to Dundee C 01np,my ‘-‘ w I”)
Sales to Perth Corpornti>n ,p
Net ioco1ne
Perth
Corporation
$500000
100000
Operat:ng i1conie (e‘Xcludmg im·estxuent iuco11ie :from Duode 56000
Inv1entol}· on hand Decent>er 31 20X8 purcl111sed froni:
Dundee Col11)all)· 36000
P? th CoipOration
Dundee
Compan1·
$350000
150000
15000
31000
Perth regular1y prices its products at cost plus a 30 percent markup for profit Dundee prices its
sales at cost plus a 10 percent markup The total sales reported by Perth and Dundee include
botf, intaroonpany sales and sales to nonaffiliated Based on the information given above what
amount atas wll be reported in the consolidated income statement for 20X8? (5 pts)
own
3 – Big corporation receives management consulting services from its 92% owned subsidiary, Small inc During 20X7, Big
paid Small 100K for its services Small’s labor cost and other associated costs for the employees providing services to Big
totaled 80,000 in 20X7 Big reported 2,567,000 of income from its own separate operations for 20X8, and Small reported net
income of 695,000 Based on the preceding information, what amount of income should be assigned to the noncontrolling
shareholders in the consolidated income statement for 20X8?
1r’
,(; l – – ? t k Intra-entity safes are as
·?4-f>ush Company o?% bf Shove Company’s outstanding common s oc
follows:
Year Inventory Cost Transfer Price Inventory on hand at end of the
I year (at transfer price)
‘
20X1 70,000 100,000 20,000
I 20X2 90,000 180,000 60,000
Assume Pu8h sold the fnvaJlmy to Shove Using the fully adjusted equity method, what journal entry
–*’ be RIOOl’lllld ll!? ? the realization of the 20X1 deferred intercompany profit and to
f;
defer the 20X2 unrealized gross proft on inventory sales to Shove?
S-XVZ Corporation purchasecj_land on January 1, 20X6, for $300,000 On ,hlly 15, 20X? it sold
the land to its parent ABC Corporation, for $400,000 ABC o ns 90 per nt of ‘)0(2’s voting
shares
a-What Worksheet intercompany eliminating entry will be made on December 31, 20X8, based on
the intercompany sale above? (4 pts)
(1 b-tf the land was still held by ABC Corporation at the endo120X9, what is the intercompany
;;-;:::: ‘ u? elimination entry at December 31,20×9 ?4 pts)
o,
c – If the land was sold by ABC Corp at the end of 20X9 for 450K, what is the intercompany
elimination entry at December 31, 20X9
d – If the land was sold by ABC corp for 450K, how much of the land gain would ultimately be
allocated to the controlling interest?
?
–16-0n January 1, 20X7, Servant Company purchased a machine with an expected economic life of
ears oD)January 1, 20X9, Servant sold the machine to Master Corporation and recorded
the following entry:
Cash
100,000
Accumulated Depreciation
60,000
Machine
150,000
Gain on Asset Sale
10,000
Master Corpo,ation t of Servant’s voting shares Servant reportecloet ? inco meof $75,000, and Ma818r ntPQrted Income from its own operations of $200,000 for 20X9 The
esUtQ&ted ?f!of:U ?? after the intercorporate transtG; 5 ye?rs
holds 75% of
a – Based on the preceding information, consolidated net income for 20X9 will be:
b – Based on the preceding information, income assigned to the noncontrolling interest in the 20X9
consolidated income statement will be:
–
–== – On January 1s1 20X1, pper purch ed 80% ? t for $SOOK ‘t the time of the purchase the
FM equa ook Value s a I , ts balance in Common h was $400K Stock at the time of the pure ase
Sal
t
‘
s net income at December 31, 20X1 was $240K Included in net income was a $30K g
ain for
‘P
inventory sold 12 Pepper during the year Salt originally purchased the inventory for $70K Pepper still
hay,geJJ,alf_of the inv;ntory on hand at the end of year Salt also paid a $10K dividend during the
year —
pe as al
v
l b
a – Prepare the basic elimination entry required to prepare the Consolidated Financial Statements at December 31, 20X1
b – Prepare the intercompany elimination entry for the sale of the inventory at December 31, 20X1
c – Prepare the intercompany elimination entry for the sale of the remaining inventory at the end of the following year
December 31, 20X2
8- n January 1, 20X1 Pepper purchase??inJerest in Salt f{ !9?0K At the time ?
f
the
d purchase, Salt’s assets and liabilities were equal to book value except for Inventory, Building an
Land (which had fair values in excess of book value of ( $20K ), $90K and $120K respectively) Net
Asset BV at the time of purchase was $450K Included in the $900K purchase price was a covenant
not to compete The convent was value at $SOK and is for a two year period At the time of the
purchase, it was determined that the all of Salt’s depreciable assets had a remaining 5 year life
The following occurred during the year:
1- Pepper sold inventory with an originally cost of $170K to Salt for $21 OK Salt sold 80% to a
third party for $240K and had 20% of the inventory remaining at the end of the year
2- On January 1, 20X1 Salt borrowed $300K from Pepper at 11 °/o interest Salt paid $25K of the
COITeSpOnding
interest and had a payable to Pepper at year end for the remaining difference Pepper had a
receivable on its books at the end of the year
3 – At December 31, 20X1, Pepper determined that 50K of the GW in Salt was impaired
4 – On January 1, 20X1, Salt sold equipment (that was originally purchased for 80K and had an associated depreciation
of 40K Salt sold the equipment to pepper for 50K At the time of the sale, it was determined that the equipment had a 5
year life remaining
5 – Salt paid Pepper 55K for accounting and tax services during the year Pepper incurred 40K in costs providing those
services to Salt
a- Calculate the total differential
b- How much of the differential will be allocated to GW?
c- What is the Goodwill balance on Peppers balance sheet at December 31, 20X1
J
I
e- Based on event #1 above, what would be the ending inventory balance on the December 31, 2X01 Salt Financials
for the inventory that has not been sold to an outside party
f- What amount of the Consolidated income from Transaction #1 will be allocated to the CI’s Share of Income?
d- What would have been the investment in Salt at December 31, 20X2 on Pepper’s Balance sheet if Pepper used the Cost
method of accounting?
g- Prepare the intercompany elimination entry for Event #2 at December 31, 20X1
h- Prepare the intercompany elimination entry for Event #4 at December 31, 20×1
i- Prepare the elimination entry for Event #4 at December 31, 20X2 (assuming the
equip is still owned by Pepper)
j- Prepare the elimination entry for Event #5 at December 31, 20X1
g-Selected information f rom th e separate and consolidated balance sheets and income statements of
Pare Inc and its subsidiary • Sh e I c o, as of Decembe_s 31, 20X5, and for the year then ended 1s as
follows:
–
B?l/Pare Shel
ccounts recei,·abl
U1,·enton 60,000 50000
lnco,11
Re,·enues $400000 $280000
(‘osl of -ll:tlOds sold {J00000) (220,000)
Gross profit 100000 60000
Consolidated
$78000
104000
$616000
(462000)
154,000
Additional infonnalion:
During 20X5, Pare sold goods to Shel at the same markup cost that Pare uses for all sales
a) What was the amount of intercompany sales from Pare to Shel during 20X5?
b) What is the amount of intercompany unrealized profit from Pare to Shel during 20X5?
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