Case I Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2012. Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends.

Instruction: 1) Compute the equity in earnings of Gargiulo reported on Posito's books for 2012, 2013, and 2014. 2) Compute the non-controlling interest in Gargiulo's net income for 2012, 2013, and 2014. 3) For consolidation purposes, what amount would be debited to cost of goods sold for the 2012/2013/2014 consolidation worksheet with regard to the unrealized gross profit of that years intra-entity transfer of merchandise? 4) For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2012/2013/2014 consolidation worksheet entry with regard to the unrealized gross profit of the prior years intra-entity transfer (if any) of merchandise? Case II Wilson owned equipment with an estimated life of 10 years when it was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2012. On January 1, 2012, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years. On April 1, 2012 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends: Instruction: 1) Compute the gain on transfer of equipment reported by Wilson for 2012. 2) Compute the amortization of gain through a depreciation adjustment for 2012/2013/2014 for consolidation purposes. 3) Compute Wilson's share of income from Simon for consolidation for 2012, 2013, and 2014.

Case II Wilson owned equipment with an estimated life of 10 years when it was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2012. On January 1, 2012, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years. On April 1, 2012 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends: Instruction:

1) Compute the gain on transfer of equipment reported by Wilson for 2012. 2) Compute the amortization of gain through a depreciation adjustment for 2012/2013/2014 for consolidation purposes. 3) Compute Wilson's share of income from Simon for consolidation for 2012, 2013, and 2014

2012 $8,000$12,000 $15,000 1,2004,000 3,000 2013 2014 Purchases by Posito Ending inventory on Posito's books 2013 $70,000 $85,000 $94,000 2012 2014 Gargiulo's net income Dividends paid by Gargiulo 10,000 10,000 15,000 2012 2013 2014 Net income Dividends $100,000 $120,000 $130,000 40,000 50,000 60,000 2012 $8,000$12,000 $15,000 1,2004,000 3,000 2013 2014 Purchases by Posito Ending inventory on Posito's books 2013 $70,000 $85,000 $94,000 2012 2014 Gargiulo's net income Dividends paid by Gargiulo 10,000 10,000 15,000 2012 2013 2014 Net income Dividends $100,000 $120,000 $130,000 40,000 50,000 60,000