On January 1, 2010, Apple Company acquired 75% of the outstanding common stock of Orange Company for $600,000 in cash. On the date of the acquisition, the fair value of the 25% noncontrolling interest in the Orange Company was $200,000. The book value of Orange Companys net assets on January 1, 2010, was $500,000 and consisted of common stock of $150,000 and retained earnings of $350,000.

Some of Orange Company assets were internally developed and were not reported on its books or had fair value that differed from it carrying value on the date of the acquisition as follows:

	Book Values	Fair Values
Patented Technologies (10 years of remaining life)	50,000	150,000
Customer List (5 years of remaining life)	-0-	75,000

Any remaining excess acquisition-date fair value was assigned to goodwill. Since acquisition, Apple has not had any goodwill impairments.

Intra-entity inventory sales between the two companies have been made as follows:

Year	Cost to Apple	Transfer Price to Orange	Ending Balance(at transfer price)
2010	130,000	180,000	45,000
2011	150,000	210,000	70,000

Presented below are the financial statements for these two companies as of December 31, 2011, prepared from their separately maintained accounting systems. Credit balances are indicated by parentheses.

The amount on Income from Orange Company account that should be reported on the Consolidated Income Statement for the year ended on December 31, 2011 should be:

(41,250)

(90,000)

(50,000)

(67,500)

None of the answers is correct

The amount of Net Income that should be reported on the Consolidated Income Statement for the year ended on December 31, 2011 should be:

(231,250)

(247,500)

(321,250)

(296,250)

None of the answers is correct

The Noncontrolling share of Net Income that should be reported on the Consolidated Income Statement for the year ended on December 31, 2011 should be:

		(22,500)
		(16,250)
		(61,875)
		(12,500)
		None of the answers is correct

APPLE COMPANY AND CONSOLIDATED ORANGE SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2011 Apple Orange Company Company 12/31/2011 12/31/2011 $ (950,000) (480,000) 280,000 Consolidation EntriesNoncontrolling Consolidated Debit Credit Interest Totals Sales Cost of goods sold 550,000 210,000 (41,250) 110,000 Operating Expense Income from Orange Company Separate Company Net income Consolidated Net Income (231,250) $ (90,000) To noncontrolling interest To parent company Retained earnings, 1/1/11 S (770,000) S (450,000) (231,250)(90,000) 40,000 $ (911,250) S (500,000) Net income Dividends paid 90,000 Retained earnings, 12/31/11 Cash and Receivables Inventory Investment in Orange Company $ 310,000 $105,000 255,000 375,000 655,000 Equipment (net) Building (net) Patent (net) Customer List Goodwill 112,000 222,000 40,000 266,000 307,000 Total assets $1,913,000$734,000 Liabilities Common stock S (401,750) $ (84,000) (600,000 (150,000) Noncontrolling Interest 1/1/11 Noncontrolling Interest 12/31/11 Retained earnings, 12/31/11 500,000 S (1,913,000) $ (734,000) 911,250 Total liabilities and equities