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Question: Problem 6-8 Upstream Eliminating Entries & Consolidated Net Income On January 2, 2014, Patten...

Problem 6-8 Upstream Eliminating Entries & Consolidated Net Income On January 2, 2014, Patten Company purchased a 90% interest in Sterling Company for $1,400,000. At that time Sterling Company had capital stock outstanding of $800,000 and retained earnings of $425,000. The difference between the book value of equity acquired and the value implied by the purchase price was allocated to the following assets:

Inventory$41,667

Plant & Equipment $200,000

Goodwill $88,889

The inventory was sold in 2014. The plant and equipment had a remaining useful life of 10 years on January 2, 2014. During 2014 Sterling sold merchandise with a cost of $950,000 to Patten at a 20% markup above cost. At December 31, 2014, Patton still had merchandise in its inventory that it purchased from Sterling for $576,000. In 2014, Sterling Company reported net income of $410,000 and declared no dividends.

a) Prepare in general journal form all entries necessary on the consolidated financial statements work paper to eliminate the effects of the intercompany sales, to eliminate the investment account, and allocate the difference between the book value of equity acquired and the value implied by the purchase price.

b) Assume that Patten Company reports net income of $2,000,000 from its independent operations. Calculate controlling interest in consolidated net income.

c) Calculate noncontrolling interest in consolidated income.

PLEASE SHOW ALL EQUATIONS