Andrea Co. acquired 70% of Calabrese Co. on January 1, 2016. At the date of acquisition, the excess acquisition price was allocated partly to undervalued building of $108,000 (6-year remaining life) and undervalued capitalized software of $860,000 (20-year remaining life). The remaining excess was allocated to goodwill of $130,000.

Various Intra-Entity Transactions Were Recorded by the Related Companies:

On February 13, 2018, Andrea Co. sold land to Calabrese Co. for $1,200,000 cash. The land had been acquired by Andrea Co. in 1987 for $380,000. On March 1, 2020, Calabrese Co. sold the land to unaffiliated buyers for $1,320,000.

On January 1, 2019, Andrea sold equipment to Calabrese Co. for $140,000. The equipment had been acquired by Andrea in 2015 at a cost of $120,000 and had a remaining book value of $100,000 at the date of transfer. The equipment had a remaining useful life of 10 years.

In 2018 through 2020, Andrea transferred finished goods to Calabrese Co. Note: Round all gross profit rates to the nearest 100th.

Period Cost Transfer Price Unsold Goods at Year-end*

2018 $ 50,000 $ 70,000 $ 12,000

2019 $ 60,000 $ 100,000 $ 30,000

2020 $ 90,000 $ 120,000 $ 50,000

16. Consolidation Worksheet Entry A would require a:

A. Debit Capitalized Software, $651,000.

B. Credit Non-controlling Interest, $237,900.

C. Credit Investment in Calabrese Co., $597,800.

D. Debit Building, $18,000.

17. In 2020, if Calabrese Co. earned income of $220,000, and declared and paid dividends of $60,000, Consolidation Worksheet Entry I would require a:

A. Debit Investment in Calabrese Co., $112,000.

B. Debit Equity in Sub Earnings, $111,300.

C. Credit to Equity in Sub Earnings, $154,000.

D. Credit to Investment in Calabrese Co., $112,000.

18. Using data in Exhibit 3 above, given the inter-entity transactions, what would be the consolidated balances for Buildings and Capitalized Software, respectively, at the balance sheet date?

A. $1,270,000; $1,223,000.

B. $1,270,000; $1,180,000.

C. $1,316,000; 1,440,000.

D. $1,288,000; $1,223,000.

Exhibit 3:

Balance Sheet (selected) Parent Subsidiary Debit Credit NCI Consolidated Buildings (net) 780,000 490,000 Capitalized Software (net) 318,000 260,000