Question
Allison Corporation acquired 90 percent of Bretton on January 1, 2016. Of Bretton's total acquisition-date fair value, $60,000 was allocated to undervalued equipment (with a
Allison Corporation acquired 90 percent of Bretton on January 1, 2016. Of Bretton's total acquisition-date fair value, $60,000 was allocated to undervalued equipment (with a 10-year remaining life) and $80,000 was attributed to franchises (to be written off over a 20-year period).
Since the takeover, Bretton has transferred inventory to its parent as follows:
Year | Cost | Transfer Price | Remaining at Year-End | |||
2016 | $ | 45,000 | $ | 90,000 | $ | 30,000 (at transfer price) |
2017 | 48,000 | 80,000 | 35,000 (at transfer price) | |||
2018 | 69,000 | 92,000 | 50,000 (at transfer price) | |||
On January 1, 2017, Allison sold Bretton a building for $50,000 that had originally cost $70,000 but had only a $30,000 book value at the date of transfer. The building is estimated to have a five-year remaining life (straight-line depreciation is used with no salvage value).
Selected figures from the December 31, 2018, trial balances of these two companies are as follows:
Allison | Bretton | |||
Sales | $ | 700,000 | $ | 400,000 |
Cost of goods sold | 440,000 | 220,000 | ||
Operating expenses | 120,000 | 80,000 | ||
Investment income | Not given | 0 | ||
Inventory | 210,000 | 90,000 | ||
Equipment (net) | 140,000 | 110,000 | ||
Buildings (net) | 350,000 | 190,000 | ||
Determine consolidated totals for each of these account balances.
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