Question
Gryffindor Company acquired 80% of Hufflepuff Company on January 2, 2019. The difference between the implied and book value of net assets of Hufflepuff on
Gryffindor Company acquired 80% of Hufflepuff Company on January 2, 2019. The difference between the implied and book value of net assets of Hufflepuff on the date of acquisition were as follows:
Land: 50,000
Equipment (10 years life): 60,000
Inventory: 40,000
Hufflepuff reported retained earnings of 260,000 on January 1, 2022, and 320,000 on December 31, 2022.
Hufflepuff reported net income of 90,000, and declared dividends of 30,000 in 2022. Also, Gryffindor reported net income using the cost method in 2022 and paid dividends of 25,000. The retained earnings of Gryffindor on December 31, 2022 is 2,700,000. The sales and cost of sales together with the intercompany sales made during 2022 are as follows:
Gryffindor Company: Sales 3,000,000 Cost of sales 1,500,000 Net Income 550,000 Intercompany sales: Gryffindor to Hufflepuff 400,000
Hufflepuff Company: Sales 1,500,000 Cost of sales 900,000 Net Income 90,000 Intercompany sales: Hufflepuff to Gryffindor 300,000
There were no intercompany sales prior to 2021.
During 2022 the following intercompany transfer of fixed assets occur.
On January 1, Hufflepuff sold a machinery with cost of 120,000, originally purchased last January 3, 2018 with 8 years useful life. Selling price is 40,000.
On June 30, Gryffindor sold an equipment with book value of 60,000 for 100,000, Remaining useful life of the equipment is 5 years
Intercompany inventories held by the affiliated companies are shown below.
Gryffindor Hufflepuff Company Company
January 1, 2022 Gryffindor Company: 30,000 Hufflepuff Company: 60,000
December 31, 2022 Gryffindor Company: 70,000 Hufflepuff Company: 40,000
1. Compute for consolidated gross profit. 2. Compute net income attributable to parent.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started