Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2016, in exchange for $567,000 in cash. The subsidiary's stockholders' equity accounts totaled $551,000 and the noncontrolling interest had a fair value of $63,000 on that day. However, a building (with a ten-year remaining life) in Brey's accounting records was undervalued by $38,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (five-year remaining life). Brey reported net income from its own operations of $89,000 in 2016 and $105,000 in 2017. Brey declared dividends of $31,500 in 2016 and $35,500 in 2017. Year 2016 2017 2018 Cost to Brey $ 94,000 143,000 171,000 Transfer Price to Pitino $ 240,000 260,000 285,000 Inventory Remaining at Year-End (at transfer price) $ 50,000 62,000 65,000 At December 31, 2018, Pitino owes Brey $41,000 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. Sales revenues Cost of goods sold Expenses Equity in earnings of Brey Net income Retained earnings, 1/1/18 Net income (above) Dividends declared Retained earnings, 12/31/18 Cash and receivables Inventory Investment in Brey Land, buildings, and equipment (net) Total assets Liabilities Common stock Retained earnings, 12/31/18 Total liabilities and equity Pitino $ (912,000) 540,000 187,900 (125,010) $ (309,110) $ (538,000) (309,110) 154,000 $ (693,110) $ 171,000 380,000 704,700 989.000 $ 2,244,700 $ (911,590) (640,000) (693,110) $(2,244,700) Brey $ (491,000) 234,000 108,000 0 $ (149,000) $ (328,000) (149,000) 61,000 $ (416,000) $ 123,000 310,000 0 353,000 $ 786,000 $ (20,000) (350,000) (416,000) $ (786,000) a. What was the annual amortization resulting from the acquisition-date fair-value allocations? b. Were the intra-entity transfers upstream or downstream? c. What intra-entity gross profit in inventory existed as of January 1, 2018? d. What intra-entity gross profit in inventory existed as of December 31, 2018? e. What amounts make up the $125,010 Equity Earnings of Brey account balance for 2018? f. What is the net income attributable to the noncontrolling interest for 2018? g. What amounts make up the $704,700 Investment in Brey account balance as of December 31, 2018? h. Prepare the 2018 worksheet entry to eliminate the subsidiary's beginning owners' equity balances. i. Without preparing a worksheet or consolidation entries, determine the consolidation balances for these two companies. Req A to D Required E | Required G Required H | Required I What amounts make up the $704,700 Investment in Brey account balance as of December 31, 2018? Investment in Brey (consideration transferred) Net income of Brey Reported 2016 2017 2018 Total Intra-entity gross profit, 12/31/18 Adjusted net income 2016-2018 Pitino's ownership Excess amortizations Dividends declared by Brey 2016 2017 2018 Total 0 Pitino's ownership Investment in Brey, 12/31/18 Consolidation Worksheet Entries Prepare entry s Note: Enter debits before credits. Transaction Accounts Debit Credit Record entry Clear entry view general journal
