Penguin Corporation acquired 80 percent of the outstanding voting stock of Snow Company on January 1, 2010,

Question:

Penguin Corporation acquired 80 percent of the outstanding voting stock of Snow Company on January 1, 2010, for $420,000 in cash and other consideration. At the acquisition date, Penguin assessed Snow’s identifiable assets and liabilities at a collective net fair value of $525,000 and the fair value of the 20 percent noncontrolling interest was $105,000. No excess fair value over book value amortization accompanied the acquisition.

The following selected account balances are from the individual financial records of these two companies as of December 31, 2011:image text in transcribed

a. Assume that Penguin sells Snow inventory at a markup equal to 40 percent of cost. Intra-entity transfers were $90,000 in 2010 and $110,000 in 2011. Of this inventory, Snow retained and then sold $28,000 of the 2010 transfers in 2011 and held $42,000 of the 2011 transfers until 2012. On consolidated financial statements for 2011, determine the balances that would appear for the following accounts:
Cost of Goods Sold Inventory Noncontrolling Interest in Subsidiary’s Net Income

b. Assume that Snow sells inventory to Penguin at a markup equal to 40 percent of cost. Intra-entity transfers were $50,000 in 2010 and $80,000 in 2011. Of this inventory, $21,000 of the 2010 transfers were retained and then sold by Penguin in 2011, whereas $35,000 of the 2011 transfers were held until 2012.
On consolidated financial statements for 2011, determine the balances that would appear for the following accounts:
Cost of Goods Sold Inventory Noncontrolling Interest in Subsidiary’s Net Income

c. Penguin sells Snow a building on January 1, 2010, for $80,000, although its book value was only $50,000 on this date. The building had a five-year remaining life and was to be depreciated using the straight-line method with no salvage value.
Determine the balances that would appear on consolidated financial statements for 2011 for Buildings (net)
Operating Expenses Noncontrolling Interest in Subsidiary’s Net Income

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: