Pitino acquired 90 percent of Brey’s outstanding shares on January 1, 2009, in exchange for $342,000 in cash. The subsidiary’s stockholders’ equity accounts totaled $326,000 and the noncon¬ trolling interest had a fair value of $38,000 on that day. However, a building (with a nine-year remaining life) in Brey’s accounting records was undervalued by $18,000. Pitino assigned the rest of the excess fair value over book value to Brey ’s patented technology (six-year remaining life). LO8 Brey reported net income from its own operations of $64,000 in 2009 and $80,000 in 2010. Brey paid dividends of $19,000 in 2009 and $23,000 in 2010.

Brey sells inventory to Pitino as follows:

Inventory Remaining Transfer Price at Year-End Year Cost to Brey to Pitino

(at transfer price)

2009

$69,000

$115,000

$25,000 2010 81,000 135,000 37,500 201 1 92,800 160,000 50,000 At December 31, 2011, Pitino owes Brey $16,000 for inventory acquired during the period. The following separate account balances are for these two companies for December 31, 2011. and the year then ended. Credits are indicated by parentheses.

Sales revenues ....

Pitino Brey

. $

(862,000)

$(366,000)

Cost of goodssold.

515,000 209,000 Expenses...

185,400 67,000 Investment income—Brey..

(68,400)

-0-

Net income...

. $

(230,000)

$ (90,000)

Retained earnings, 1/1/11.

. $

(488,000)

$(278,000)

Net income (above) ..... ,

(230,000)

(90,000)

Dividends paid....

136,000 27,000 Retained earnings, 12/31/11.

. $

(582,000)

$(341,000)

Cash and receivables...

. . . . . $

146,000 CO GO O

o o

Inventory...

255,000 136,000 Investment in Brey .....

450,000

-0-

Land, buildings, and equipment (net).

964,000 328,000 Total assets .......

. . . . . $ '

1,815,000

$ 562,000 Liabilities.
Common stock.
Retained earnings, 12/31/11 Total liabilities and equities Pitino $ (718,000) (515,000) (582,000)
$(1,815,000)
Brey $ (71,000) (150,000) (341,000)
$(562,000)
Answer each of the following questions:

a. What was the annual amortization resulting from the acquisition-date fair-value allocations?

b. Were the intercompany transfers upstream or downstream?

c. What unrealized gross profit existed as of January 1, 2011?

d. What anrealized gross profit existed as of December 31,2011?

e. What amounts make up the $68,400 Investment Income—Brey account balance for 2011? f What was the noncontrolling interest’s share of the subsidiary’s net income for 2011?
g.What amounts make up the $450,000 Investment in Brey account balance as of December 31, 2011?
h. What Entry S is required in producing a 2011 consolidation worksheet?
i. Without preparing a worksheet or consolidation entries, determine the consolidation balances for these two companies.