Consolidation Worksheet: Downstream Multiple-Year Transfers — 100% Ownership Compara¬

tive financial statements of Puma Inc. and its 100%-owned subsidiary, Suma Inc. (created five years ago), are as follows:

Puma Inc. Suma Inc.

Income Statement (2006)

Sales Cost Expenses of

.

sales

.

.

Intercompany Accounts Equity Dividend in income net income

.

(of Suma) .

Intercompany Intercompany sales cost of

.

sales .

Net Income .

Statement of Retained Earnings (2006)

+

Balances, Net income 1/1/06

.

.

- Dividends declared .

Balances, as of 12/31/06 .

Balance Sheet (as of 12/31/06)

Inventory:

Investment Other Intercompany From assets vendor in

.

subsidiary

.

.

.

Total Assets .

Common Liabilities Retained Total stock Liabilities earnings

.

.

.

and Equity .

$ 500,000 $210,000 (290,000) (99,000) (205,000) (71,000)

40,000 100,000

(60,000)

$ 85,000 $ 40,000

$ 190,000 $ 50,000 85,000

(25,000) 40,000 (20,000)

$ 250,000 $ 70,000

$ 200,000 150,000 $ 25,000 500,000 225,000

$ 850,000 $250,000

$ 300,000 $100,000 300,000 80,000 250,000 70,000 Additional Information 1. At 12/31/05 (the preceding year-end), Suma had on hand inventory it had acquired in 2005 from Puma at a cost of $24,000. Puma’s cost was $20,000. Suma resold all of this inventory in 2006 for $33,000.
2. No general ledger entries were made at the end of 2005 or 2006 to defer unrealized intercom¬
pany profit.
Required 1.
2.
3. 4.
Determine the unrealized profit at year-end by preparing an analysis. {For Module 1 only: Also make the necessary (1) beginning-of-year correcting entry [a debit to beginning retained earn¬
ings and a credit to intercompany profit recognition] and (2) end-of-year general ledger adjust¬
ing entry to reflect the deferral of profit on Puma’s books. Adjust the statements accordingly.) Prepare all consolidation entries as of 12/31/06.
Prepare a consolidation worksheet at 12/31/06.
Is the subsidiary a manufacturer or a distributor}