Part 3: Intraentity Inventory Transfers (25 pts) Assume that Post Malone Co. acquires 85% of the voting stock of Selena Gomez Co, on January 1, 2020. Post Malone pays $500,000, and the acquisition date fair value of the noncontrolling interest is $ 75,000. Post allocates the entire $45,000 excess fair value over book value to adjust a database owned by Selena to fair value. The database has an estimated remaining life of 20 years. Post applies the equity method to its investment in Selena. During the two years Selena reported the following Fiscal Year 2020 2021 Net Income 40,000 60,000 Dividends Declared 25,000 45,000 During 2020, Post Malone sells inventory costing $52,500 to Selena for $75,000. At the end of 2020,40% of the inventory remains but is then sold in 2021. During 2021, Post Malone sellsinventory costing $ 65,000 to Selena for $100,000. At the end of 2021 40% of the current year inventory still remains in Selena's inventory Step 1: Calculate the Ending Inventory Profit Deferral for both years (8 pts) Sales Price Cost Gross Profit Inventory remaining at year-end (at transfer price) Gross Profit % Gross profit remaining at year end $ Step 2: Compute the Equity Method balance in Post Malones Investment in Selena Gomez account as of Dec 31, 2021 (8 pts 85% Consideration paid (fair value) Selena Gomez Co net inccome for 2020 Database amortization Selena Gomez Co adjusted Net Income Post Malone's Ownership % Post Malone's share of Selena Gomez's net income Deferred Profit from Post Malone's 2020 downstream sales Equity in earnings of Selena Gomez Co Post Malone's share of Selena Gomez's dividends, 2020 Balance 12/31/20 Selena Gomez Co net inccome for 2021 Database amortization Selena Gomez Co adjusted Net Income Post Malone's Ownership % Post Malone's share of Selena Gomez's net income Recognized Profit from Post Malone's zozo downstream sales Deferred Profit from Post Malone's 2021 downstream sales Equity in earnings of Selena Gomez Co Post Malone's share of Selena Gomez's dividends, 2021 Balance 12/31/21 85% Part 3: Prepare the 3 consolidation entries asked for below related to the intra-entity transfers (9 pts): Debit Credit Consolidation Entry *G Consolidation Entry TI Consolidation Entry G Part 3: Intraentity Inventory Transfers (25 pts) Assume that Post Malone Co. acquires 85% of the voting stock of Selena Gomez Co, on January 1, 2020. Post Malone pays $500,000, and the acquisition date fair value of the noncontrolling interest is $ 75,000. Post allocates the entire $45,000 excess fair value over book value to adjust a database owned by Selena to fair value. The database has an estimated remaining life of 20 years. Post applies the equity method to its investment in Selena. During the two years Selena reported the following Fiscal Year 2020 2021 Net Income 40,000 60,000 Dividends Declared 25,000 45,000 During 2020, Post Malone sells inventory costing $52,500 to Selena for $75,000. At the end of 2020,40% of the inventory remains but is then sold in 2021. During 2021, Post Malone sellsinventory costing $ 65,000 to Selena for $100,000. At the end of 2021 40% of the current year inventory still remains in Selena's inventory Step 1: Calculate the Ending Inventory Profit Deferral for both years (8 pts) Sales Price Cost Gross Profit Inventory remaining at year-end (at transfer price) Gross Profit % Gross profit remaining at year end $ Step 2: Compute the Equity Method balance in Post Malones Investment in Selena Gomez account as of Dec 31, 2021 (8 pts 85% Consideration paid (fair value) Selena Gomez Co net inccome for 2020 Database amortization Selena Gomez Co adjusted Net Income Post Malone's Ownership % Post Malone's share of Selena Gomez's net income Deferred Profit from Post Malone's 2020 downstream sales Equity in earnings of Selena Gomez Co Post Malone's share of Selena Gomez's dividends, 2020 Balance 12/31/20 Selena Gomez Co net inccome for 2021 Database amortization Selena Gomez Co adjusted Net Income Post Malone's Ownership % Post Malone's share of Selena Gomez's net income Recognized Profit from Post Malone's zozo downstream sales Deferred Profit from Post Malone's 2021 downstream sales Equity in earnings of Selena Gomez Co Post Malone's share of Selena Gomez's dividends, 2021 Balance 12/31/21 85% Part 3: Prepare the 3 consolidation entries asked for below related to the intra-entity transfers (9 pts): Debit Credit Consolidation Entry *G Consolidation Entry TI Consolidation Entry G
