Question
Gargiulo Company, a 80% owned subsidiary of Posito Corporation, transfers inventory to Posito at a 30% gross profit rate. The following data are available pertaining
Gargiulo Company, a 80% owned subsidiary of Posito Corporation, transfers inventory to Posito at a 30% gross profit rate. The following data are available pertaining specifically to Positos intra-entity purchases from Gargiulo. Gargiulo was acquired on January 1, 2017.
| 2017 | 2018 | 2019 |
Purchases by Posito | $8,000 | $12,000 | $15,000 |
Ending inventory on Positos books | 2,400 | 3,000 | 6,000 |
Assume the equity method is used. The following data are available pertaining to Gargiulos income and dividends.
| 2017 | 2018 | 2019 |
Gargiulos net income | $80,000 | $95,000 | $98,000 |
Dividends paid by Gargiulo | 10,000 | 10,000 | 15,000 |
Part A: Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Gargiulo for 2018.
Part B: Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Gargiulo for 2019.
Part C: For consolidation purposes, what amount would be debited to cost of goods sold for the 2017 consolidation worksheet with regard to unrecognized intra-entity gross profit remaining in ending inventory with respect to the transfer of merchandise?
Part D: For consolidation purposes, what amount would be debited to cost of goods sold for the 2018 consolidation worksheet with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2018 transfer of merchandise?
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