On January 1, 2000 the Gandoff Company purchased all of the stock of the Frodo Company at book value. Gandoff accounts for its purchase in Frodo using the initial value method and Frodo does not pay any dividends. In 2016 Gandoff sold inventory to Frodo for $90,000. Gandoff had purchased the inventory for $45000. At the end of 2016 Frodo still possessed all of the inventory. In 2016 Gandoff and Frodo reported the following income statements
__________Gandoff ___________Frodo
Sales ......... 2,000,000 .............. 200,000
Cogs ........ 1,000,000 .............. 100,000
Income ..... 1,000,000 .............. 100,000
In 2017 Frodo sold 2/3 of the inventory acquired from Gandoff in 2016. Gandoff and Frodo had the following income statements in 2017
___________Gandoff ___________Frodo
Sales ......... 2,000,000 .............. 200,000
Cogs ........ 1,000,000 .............. 100,000
Income ..... 1,000,000 .............. 100,000
In 2018 Frodo sold the other 1/3 of the inventory acquired from Gandoff in 2016. Gandoff and Frodo had the following income statements in 2018
___________Gandoff ___________Frodo
Sales ......... 2,000,000 .............. 200,000
Cogs ........ 1,000,000 .............. 100,000
Income ..... 1,000,000 .............. 100,000
Required:
Make the necessary worksheet entries needed in 2016 and prepare a 2016 consolidated income statement.
Make the necessary worksheet entries needed in 2017 and prepare a 2017 consolidated income statement.
Make the necessary worksheet entries needed in 2018 and prepare a 2018 consolidated income statement.