Question
Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2016, in exchange for $405,000 in cash. The subsidiary's stockholders' equity accounts totaled $389,000
Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2016, in exchange for $405,000 in cash. The subsidiary's stockholders' equity accounts totaled $389,000 and the noncontrolling interest had a fair value of $45,000 on that day. However, a building (with a nine-year remaining life) in Brey's accounting records was undervalued by $27,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (four-year remaining life).
Brey reported net income from its own operations of $71,000 in 2016 and $87,000 in 2017. Brey declared dividends of $22,500 in 2016 and $26,500 in 2017.
Year | Cost to Brey | Transfer Price to Pitino | Inventory Remaining at Year-End |
2016 | $76,000 | $150,000 | $32,000 |
2017 | $102,000 | $170,000 | $44,500 |
2018 | $126,750 | $195,000 | $70,000 |
At December 31, 2018, Pitino owes Brey $23,000 for inventory acquired during the period.
The following separate account balances are for these two companies for December 31, 2018, and the year then ended.
Note: Parentheses indicate a credit balance.
Pitino | Brey | |
Sales Revenue | (876,000) | (401,000) |
COGS | 522,000 | 216,000 |
Expenses | 186,1000 | 72,000 |
Equity in earnings of Brey | (85,320) | 0 |
Net Income | (253,220) | (113,000) |
Retained Earnings, 1/1/18 | (502,000) | (292,000) |
Net Income (above) | (253,220) | (113,000) |
Dividends declared | 136,000 | 26,000 |
Retained Earnings, 12/31/18 | (619,220) | (379,000) |
Cash and Receivables | 153,000 | 105,000 |
Inventory | 290,000 | 171,000 |
Investment in Brey | 528,300 | 0 |
Land, buildings, and equipment (net) | 971,000 | 335,000 |
Total Assets | 1,942,300 | 611,000 |
Liabilities | (773,080) | (26,000) |
Common Stock | (550,000) | (206,000) |
Retained Earnings, 12/31/18 | (619,220) | (379,000) |
Total Liabilities and Equity | (1,942,300) | (611,000) |
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What amounts make up the $85,320 Equity Earnings of Brey account balance for 2018?
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What is the net income attributable to the noncontrolling interest for 2018?
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What amounts make up the $528,300 Investment in Brey account balance as of December 31, 2018?
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Prepare the 2018 worksheet entry to eliminate the subsidiarys beginning owners equity balances.
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Without preparing a worksheet or consolidation entries, determine the consolidation balances for these two companies.
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