P Company owns 80% of the common stock of S Company. P sells merchandise to S at 20% above cost. During 2011 and 2012, intercompany sales amounted to $1,080,000 and $1,200,000 respectively. At the end of 2011, S had one-fifth of the goods purchased that year from P in its ending inventory. Ss 2012 ending inventory contained one-fourth of that years purchases from P. There were no intercompany sales prior to 2011.

P reported net income from its own operations of $720,000 in 2011 and $760,000 in 2012. S reported net income of $400,000 in 2011 and $460,000 in 2012. Neither company declared dividends in either year.

Required:

1. Prepare in general journal form all entries necessary on the consolidated statements workpapers to eliminate the effects of the intercompany sales for both 2011 and 2012.
2. Calculate controlling interest in consolidated net income for 2012.

Question 2:

On January 1, 2011, Price Company purchased an 80% interest in the common stock of Stahl Company for $1,040,000, which was $60,000 greater than the book value of equity acquired. The difference between implied and book value relates to the subsidiarys land.

The following information is from the consolidated retained earnings section of the consolidated statements workpaper for the year ended December 31, 2011:

	STAHL COMPANY	CONSOLIDATED BALANCES
1/01/11 retained earnings	$300,000	$1,400,000
Net income	220,000	680,000
Dividends declared	(80,000)	(140,000)
12/31/11 retained earnings	$440,000	$1,940,000

Stahls stockholders equity includes only common stock and retained earnings.

Required:

1. Prepare the workpaper eliminating entries for a consolidated statements workpaper on December 31, 2011. Price uses the cost method.
2. Compute the total noncontrolling interest to be reported on the consolidated balance sheet on December 31, 2011.