Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2021, Sledge had common stock of $250,000 and retained earnings of $390,000. During that year, Sledge reported sales of $260,000, cost of

On January 1, 2021, Sledge had common stock of $250,000 and retained earnings of $390,000. During that year, Sledge reported sales of $260,000, cost of goods sold of $135,000, and operating expenses of $53,000.

On January 1, 2019, Percy, Inc., acquired 80 percent of Sledge's outstanding voting stock. At that date, $73,000 of the acquisition-date fair value was assigned to unrecorded contracts (with a 20-year life) and $33,000 to an undervalued building (with a 10-year remaining life).

In 2020, Sledge sold inventory costing $16,800 to Percy for $28,000. Of this merchandise, Percy continued to hold $7,000 at year-end. During 2021, Sledge transferred inventory costing $18,150 to Percy for $33,000. Percy still held half of these items at year-end.

On January 1, 2020, Percy sold equipment to Sledge for $18,500. This asset originally cost $29,000 but had a January 1, 2020, book value of $11,600. At the time of transfer, the equipment's remaining life was estimated to be five years.

Percy has properly applied the equity method to the investment in Sledge.

  1. Prepare worksheet entries to consolidate these two companies as of December 31, 2021.
  2. Compute the net income attributable to the noncontrolling interest for 2021.

11Retained earnings2,800 Cost of goods sold 2,800 22Equipment10,500 Investment in Sledge5,520 Accumulated depreciationEquipment 16,020 33Common stock250,000 Retained earnings387,200 Investment in Sledge 509,760 Noncontrolling interest in Sledge 127,400 44Contracts65,700 Buildings26,400 Investment in Sledge 73,680 Noncontrolling interest in Sledge 18,420 55Equity in income of Sledge Noncontrolling interest in Sledge 66Depreciation expense3,300 Amortization expense3,650 Contracts 3,650 Buildings 3,300 77Sales33,000 Cost of goods sold 33,000 88Cost of goods sold8,250 Inventory 8,250 99Accumulated depreciationEquipment Depreciation expense

2. Compute the net income attributable to the noncontrolling interest for 2021.

Net income attributable to noncontrolling interest

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions