Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2016, in exchange for $396,000 in cash. The subsidiary's stockholders' equity accounts totaled $380,000 and the noncontrolling interest had a fair value of $44,000 on that day. However, a building (with a ten-year remaining life) in Brey's accounting records was undervalued by $25,000. 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 $70,000 in 2016 and $86,000 in 2017. Brey declared dividends of $22,000 in 2016 and $26,000 in 2017.

Year	Cost to Brey			Transfer Price to Pitino			Inventory Remaining at Year-End (at transfer price)
2016	$	75,000		$	145,000		$	31,000
2017		82,500			165,000			43,500
2018		95,000			190,000			65,000

At December 31, 2018, Pitino owes Brey $22,000 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 revenues	$	(874,000	)		$	(396,000	)
Cost of goods sold		521,000				215,000
Expenses		186,000				70,000
Equity in earnings of Brey		(80,100	)			0
Net income	$	(247,100	)		$	(111,000	)
Retained earnings, 1/1/18	$	(500,000	)		$	(290,000	)
Net income (above)		(247,100	)			(111,000	)
Dividends declared		135,000				25,000
Retained earnings, 12/31/18	$	(612,100	)		$	(376,000	)
Cash and receivables	$	152,000			$	104,000
Inventory		285,000				166,000
Investment in Brey		510,975				0
Land, buildings, and equipment (net)		970,000				334,000
Total assets	$	1,917,975			$	604,000
Liabilities	$	(760,875	)		$	(30,000	)
Common stock		(545,000	)			(198,000	)
Retained earnings, 12/31/18		(612,100	)			(376,000	)
Total liabilities and equity	$	(1,917,975	)		$	(604,000	)

What was the annual amortization resulting from the acquisition-date fair-value allocations?

Were the intra-entity transfers upstream or downstream?

What intra-entity gross profit in inventory existed as of January 1, 2018?

What intra-entity gross profit in inventory existed as of December 31, 2018?

What amounts make up the $80,100 Equity Earnings of Brey account balance for 2018?

What is the net income attributable to the noncontrolling interest for 2018?

What amounts make up the $510,975 Investment in Brey account balance as of December 31, 2018?

Prepare the 2018 worksheet entry to eliminate the subsidiarys beginning owners equity balances.

Without preparing a worksheet or consolidation entries, determine the consolidation balances for these two companies.

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?

Annual amortization
Intra-entity transfers
Intra-entity gross profit, January 1, 2018
Intra-entity gross profit, December 31, 2018

e. What amounts make up the $80,100 Equity Earnings of Brey account balance for 2018?

Breys reported net income
Excess fair value amortization
Realized gross profit
Deferred gross profit
Adjusted subsidiary net income
Ownership		%
Equity in earnings of Brey

f. What is the net income attributable to the noncontrolling interest for 2018?

Net income attributable to noncontrolling interest

g. What amounts make up the $510,975 Investment in Brey account balance as of December 31, 2018?

Investment in Brey (consideration transferred)
Net income of Brey
Reported 2016
2017
2018
Total	0
Intra-entity gross profit, 12/31/18
Adjusted net income 2016-2018	0
Pitinos ownership		%
Excess amortizations
Dividends declared by Brey
2016
2017
2018
Total	0
Pitino's ownership		%
Investment in Brey, 12/31/18			$0

h. Prepare the 2018 worksheet entry to eliminate the subsidiary's beginning owners' equity balances. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Consolidation Worksheet Entries

Prepare entry S

Note: Enter debits before credits.

Transaction	Accounts	Debit	Credit
1

i. Without preparing a worksheet or consolidation entries, determine the consolidation balances for these two companies.

	Consolidated Balance
Sales revenues
Cost of goods sold
Expenses
Equity in earnings of Brey
Noncontrolling interest in consolidated net income
Consolidated net income to parent
Retained earnings, 1/1
Dividends declared
Retained earnings, 12/31
Cash and receivables
Inventory
Investment in Brey
Land, buildings, and equipment
Patented technology
Total Assets
Liabilities
Noncontrolling interest in Brey, 12/31
Common Stock
Retained earnings, 12/31
Total liabilities and stockholders' equity