Problem $3$

Progress Company acquired

$60\%$

of Stall Corporation on $\frac{1}{2020}.$ Fair values of Stall's assets and liabilities

approximated book values on that date. Progress uses the initial value method

to account for its investment in Stall.

On $1/2021,$ Progress bought equipment from Stall for $$60,000$ that

had originally cost Stall $$120,000$ and had

$$100,000$

of Accumulated depreciation at the time. The equipment had a five$-$year

remaining life and was being depreciated using the straight line method.

You are preparing the worksheet for the $2022$ fiscal year.

a$.$ Was this equipment sale upstream or downstream?

b$.$ How much unrealized net gain from the equipment transfer remains at the

beginning of $2022?($this is the amount you will need for the ${?}^{**}$ TA entry at $\frac{1}{2022}.)$

c$.$ Which company's Retained earnings account will be adjusted in the $*$TA entry

in part a$?($Which company was the "initiator" of the transaction?$)$

d$.$ How much excess depreciation will there be in each of the first five years

after the transfer?

e$.$ Progress's $2022$ net income, without including any investment income, was

$$400,000$ and Stall reported net income of

$$125,000$ in $2022.$

What consolidated income will be reported before removing the noncontrolling

interest's share of the subsidiary's net income? $($This includes the effect

of the ED entry.$)$

f$.$ What will the noncontrolling interest's share of the subsidiary's net income be for

$2022?($Consider whether the equipment sale had been upstream or downstream.$)$