Assume Company P purchased Company S on January 1, 2011. The consolidated worksheet you have is for the second year after purchase (2012). Further assume that the simple equity adjustment for net income from Sub in 2011 was $40,000, which was debited to the investment in Company Saccount. Based on this information, prepare answers to the following (Assume simple equity method):
What is the normal gross profit margin that Co. S. earns on its outside inventory sales? (show calculation).
What is the purpose of eliminating entry (B1). Why is this entry necessary?
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Trial Balance Eliminatons & Adjustments Cr. balanoe amounts are in parentheses Consolidated Statement 600,000) 400,000 (530,000) 280,000 OS) 150,000 Cost of Goods Sold 150,000 Depreciation Expense Other Expenses Subsidary Inoome 532,000 89,000 130,000 40,000 60,000 50,000 70,000 (CY1) 104,000 Net Income (204,000) (130,000) (229,000) NCI (see distribution schedule) Cantroling Interest (see dstribution schedule) (25,600) Retalned Earnings Statement Retained Eamings, January 1,2012-Company 600,000) Retained Eamings, January 1,2012-Company S (EL) 320,000 (NCI) (33,400) (26,600) 4,000 1,600 Net Income (carrydown) Dividends Declared Retained Earnings, December 31, 2012 NCI, Retained Earnings, December 31,2012 Cantrolling Interest, Retalned Eamings,December 31, 2012 (204,000) (130,000) (CY 16,000 (804,000) 115,000 792,500 Balance Sheet Accounts Receiable Plant Assets Accumulated Depreciation 300,000 120,000 236,000 250,000 180,000 400,000 (60,000) 10,000 20,000 5,000 540,000 280,000 631,000 1,000 (158,500 Imestment in Company 628,000 (CY2) 16,000 (CY1) 104,000 (EL) 480,000 60000 Goodwill Current Liabilities Common Stock ($5par)- Company S Common Sbok ($10 par) Company P Retained Earnings (carrydown) Retained Eamings,Controll ing Interest December 31,2012 Retained Eamings, NCI, December 31,2012 Total NCI 75,000 20,000 160,000 75,000 (60,000) (200,000) (120,000) (300,000) (792,500) 155,000) (EL) (40,000) (804,000) (510,000) (115,000) (155,000) Totals 869,000 889,000 Trial Balance Eliminatons & Adjustments Cr. balanoe amounts are in parentheses Consolidated Statement 600,000) 400,000 (530,000) 280,000 OS) 150,000 Cost of Goods Sold 150,000 Depreciation Expense Other Expenses Subsidary Inoome 532,000 89,000 130,000 40,000 60,000 50,000 70,000 (CY1) 104,000 Net Income (204,000) (130,000) (229,000) NCI (see distribution schedule) Cantroling Interest (see dstribution schedule) (25,600) Retalned Earnings Statement Retained Eamings, January 1,2012-Company 600,000) Retained Eamings, January 1,2012-Company S (EL) 320,000 (NCI) (33,400) (26,600) 4,000 1,600 Net Income (carrydown) Dividends Declared Retained Earnings, December 31, 2012 NCI, Retained Earnings, December 31,2012 Cantrolling Interest, Retalned Eamings,December 31, 2012 (204,000) (130,000) (CY 16,000 (804,000) 115,000 792,500 Balance Sheet Accounts Receiable Plant Assets Accumulated Depreciation 300,000 120,000 236,000 250,000 180,000 400,000 (60,000) 10,000 20,000 5,000 540,000 280,000 631,000 1,000 (158,500 Imestment in Company 628,000 (CY2) 16,000 (CY1) 104,000 (EL) 480,000 60000 Goodwill Current Liabilities Common Stock ($5par)- Company S Common Sbok ($10 par) Company P Retained Earnings (carrydown) Retained Eamings,Controll ing Interest December 31,2012 Retained Eamings, NCI, December 31,2012 Total NCI 75,000 20,000 160,000 75,000 (60,000) (200,000) (120,000) (300,000) (792,500) 155,000) (EL) (40,000) (804,000) (510,000) (115,000) (155,000) Totals 869,000 889,000
