Question
Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2017, for $460,000 in cash and other consideration. At
Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2017, for $460,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft's identifiable assets and liabilities at a collective net fair value of $665,000 and the fair value of the 20 percent noncontrolling interest was $115,000. No excess fair value over book value amortization accompanied the acquisition.
The following selected account balances are from the individual financial records of these two companies as of December 31, 2018:
Protrade Seacraft
Sales$780,000 $500,000
Cost of goods sold 360,000 267,000
Operating expenses 164,000 119,000
Retained earnings, 1/1/18 880,000 320,000
Inventory 360,000 124,000
Buildings (net) 372,000 171,000
Investment income Not given 0
A. Assume that Protrade sells Seacraft inventory at a markup equal to 40 percent of cost. Intra-entity transfers were $104,000 in 2017 and $124,000 in 2018. Of this inventory, Seacraft retained and then sold $42,000 of the 2017 transfers in 2018 and held $56,000 of the 2018 transfers until 2019. Determine balances for the following items that would appear on consolidated financial statements for 2018:
B. Assume that Seacraft sells inventory to Protrade at a markup equal to 40 percent of cost. Intra-entity transfers were $64,000 in 2017 and $94,000 in 2018. Of this inventory, $35,000 of the 2017 transfers were retained and then sold by Protrade in 2018, whereas $49,000 of the 2018 transfers were held until 2019. Determine balances for the following items that would appear on consolidated financial statements for 2018:
C. Protrade sells Seacraft a building on January 1, 2017, for $108,000, although its book value was only $64,000 on this date. The building had a five-year remaining life and was to be depreciated using the straight-line method with no salvage value. Determine balances for the following items that would appear on consolidated financial statements for 2018:
a. | cost of goods sold | |
inventory | ||
net income attributable | ||
b. | Cost of goods sold | |
Inventory | ||
Net income attributable | ||
c. | Building (net) | |
operating expenes | ||
Net income attributable to noncontrolling interest |
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