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Consolidation subsequent to date of acquisition-upstream intercompany inventory sale - Equity method with noncontrolling interest, AAP, and upstream intercompany inventory sale Assume that, on January

Consolidation subsequent to date of acquisition-upstream intercompany inventory sale- Equity method with noncontrolling interest, AAP, and upstream intercompany inventory sale Assume that, on January 1, 2007, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $550,000 over the book value of the subsidiary's Stockholders' Equity on the acquisition date. the parent assigned the excess to the following [A] assets:

[A] Asset Initial Fair Value Useful Life (years)
Patent $300,000 10
Goodwill 250,000 Indefinite
$550,000

80% of the Goodwill is allocated to the parent. Assume that the subsidiary sells inventory to the parent (upstream) which includes that inventory in products that it ultimately sells to customers outside of the controlled group. You have compiled the following data as of 2012 and 2013:

2012 2013
Transfer price for inventory sale $675,000 $733,000
Cost of goods sold (615,000) (653,000)
Gross profit $60,000 $80,000
% inventory remaining 25% 35%
Gross profit deferred $15,000 $28,000
EOY receivable/payable $94,000 $110,000

The inventory not remaining at the end of the year has been sold outside of the controlled group.The parent and the subsidiary report the following financial statements at December 31, 2013:

Parent Subsidiary Parent Subsidiary
Income statement: Balance sheet:
Sales $6,770,000 $2,522,500 Assets
Cost of goods sold (4,739,000) (1,511,100) Cash $799,240 $700,785
Gross profit 2,031,000 1,011,400 Accounts receivable 866,560 584,292
Equity income 250,872 Inventory 1,313,380 750,513
Operating expenses (1,242,600) (654,810) Equity investment 1,849,865
Net income $1,039,272 356,590 Property, plant and equipment (PPE), net 6,317,764 1,388,533
$11,146,809 $3,424,123
Statement of retained earnings:
BOY retained earnings $3,401,248 $1,301,225 Liabilities and stockholders' equity
Net income 1,039,272 356,590 Current liabilities $972,849 $584,292
Dividends (199,210) (35,259) Long-term liabilities 4,000,000 839,500
EOY retained earnings $4,241,310 $1,622,556 Common stock 1,106,895 167,900
APIC 825,755 209,875
Retained earnings 4,241,310 1,622,556
$11,146,809 $3,424,123

e. Independently compute the owners' equity attributable to the noncontrolling interest beginning and ending balances starting with the owners' equity of the subsidiary.

  • Round your answers to the nearest whole number.
  • Use a negative sign with your answer to indicate a reduction to net income.

Noncontrolling interest at 1/1/13:
Common stock Answer

APIC Answer

Retained earnings Answer

AnswerCommon stockAPICRetained earningsUnamortized AAP80% of upstream deferred intercompany profits20% of upstream deferred intercompany profits

Answer

Less: AnswerCommon stockAPICRetained earningsUnamortized AAP80% of upstream deferred intercompany profits20% of upstream deferred intercompany profits

Answer

Answer

Noncontrolling interest at 12/31/13:
Common stock Answer

APIC Answer

Retained earnings Answer

AnswerCommon stockAPICRetained earningsUnamortized AAP80% of upstream deferred intercompany profits20% of upstream deferred intercompany profits

Answer

Less: AnswerCommon stockAPICRetained earningsUnamortized AAP80% of upstream deferred intercompany profits20% of upstream deferred intercompany profits

Answer

Answer

f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income.

  • Round your answers to the nearest whole number.
  • Use a negative sign with your answer to indicate a reduction to net income.

Consolidated:
Parent's stand-alone net income Answer

Subsidiary's stand-alone net income Answer

Plus: Answer80% AAP amortization20% AAP amortization100% AAP amortization80% realized upstream deferred profits20% realized upstream deferred profits100% realized upstream deferred profits80% unrealized upstream deferred profits20% unrealized upstream deferred profits100% unrealized upstream deferred profits

Answer

Less: Answer80% AAP amortization20% AAP amortization100% AAP amortization80% realized upstream deferred profits20% realized upstream deferred profits100% realized upstream deferred profits80% unrealized upstream deferred profits20% unrealized upstream deferred profits100% unrealized upstream deferred profits

Answer

100% AAP amortization Answer

Subsidiary's adjusted stand-alone net income Answer

Consolidated net income Answer

Parent:
Parent's stand-alone net income Answer

80% Subsidiary's stand-alone net income Answer

Plus: Answer80% AAP amortization20% AAP amortization100% AAP amortization80% realized upstream deferred profits20% realized upstream deferred profits100% realized upstream deferred profits80% unrealized upstream deferred profits20% unrealized upstream deferred profits100% unrealized upstream deferred profits

Answer

Less: Answer80% AAP amortization20% AAP amortization100% AAP amortization80% realized upstream deferred profits20% realized upstream deferred profits100% realized upstream deferred profits80% unrealized upstream deferred profits20% unrealized upstream deferred profits100% unrealized upstream deferred profits

Answer

80% AAP amortization Answer

80% of subsidiary's stand-alone net income Answer

Consolidated net income attributable to the parent Answer

Subsidiary:
20% of subsidiary's stand-alone net income Answer

Plus: Answer80% AAP amortization20% AAP amortization100% AAP amortization80% realized upstream deferred profits20% realized upstream deferred profits100% realized upstream deferred profits80% unrealized upstream deferred profits20% unrealized upstream deferred profits100% unrealized upstream deferred profits

Answer

Less: Answer80% AAP amortization20% AAP amortization100% AAP amortization80% realized upstream deferred profits20% realized upstream deferred profits100% realized upstream deferred profits80% unrealized upstream deferred profits20% unrealized upstream deferred profits100% unrealized upstream deferred profits

Answer

20% AAP amortization Answer

Answer

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