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On January 1, 2020, Wondersome Company acquired a 70% interest in Philmore Company for a purchase price that was $240,000 over the book value of

On January 1, 2020, Wondersome Company acquired a 70% interest in Philmore Company for a purchase price that was $240,000 over the book value of the Philmores Stockholders Equity on the acquisition date. Wondersome uses the equity method to account for its investment in Philmore. Wondersome assigned the acquisition-date AAP as follows:

AAP Initial FV Useful Life (in years)
PPE, net $90,000 20
Patent $50,000 10
$240,000

Philmore sells inventory to Wondersome (upstream) which includes that inventory in products that it, ultimately, sells to customers outside of the controlled group. You have compiled the following data for the years ending 2022 and 2023:

2022 2023
Transfer price, Inventory sale $94,500 $70,000
COGS -64,500 -45,000
Gross Profit $30,000 $25,000
% inventory remain 30% 20%
GP deferred $9,000 $5,000
EOY Receivable/Payable $32,000 $29,500

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, 2023:

Income Statement

Wondersome Philmore

Sales

2,400,00 602,400
COGS -1,580,000 -465,398
Gross Profit 820,000 137,002
Income (loss) from subsidiary 45,851
Operating expenses -711,200 -56,000
Net income $154,651 $81,002

Statement of Retained Earnings

Wondersome Philmore
BOY Retained earnings 3,500,000 608,000
Net income 154,651 81,002
Dividends -85,000 -15,000
EOY Retained earnings $3,569,651 $674,002

Balance Sheet

Wondersome Philmore
Assets:
Cash 450,000 84,700
Accounts receivable 425,000 113,200
Inventory 654,000 142,100
Equity investment 803,251
PPE, net 4,438,400 1,000,002
TOTAL Assets $6,770,651 $1,340,002
Liabilities & Stockholders' Equity:
Current liabilities 505,900 99,500
Long-term liabilities 703,500 250,00
Common stock 402,000 75,300
APIC 1,589,600 241,200
Retained earnings 3,569,651 674,002
TOTAL L & SE $6,770,651 $1,340,002

Required:

  1. Compute the EOY noncontrolling interest equity balance
  2. Prepare the consolidation journal entries.

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