Q1:

(A) owns 60 percent of (B) Company's stock. During 20X8, (B) produced 100,000 bags of flour, which it sold to (A) for $900,000. On December 31, 20X8,(A) had 20,000 bags of flour purchased from (B) on hand. (B) prices its sales at cost plus 50 percent of cost for profit. (A), which purchased all its flour from (B) in 20X8, had no inventory on hand on January 1, 20X8.

(A) reported income from its baking operations of $400,000, and (B) Products reported net income of $150,000 for 20X8.

Required

1. Compute the amount reported as cost of goods sold in the 20X8 consolidated income statement.
3. Compute the amounts reported as consolidated net income and income assigned to the controlling interest in the 20X8 consolidated income statement.

Q2:

(A) Company acquired 60 percent ownership of (B) Company's voting shares on January 1, 20X2. During 20X5, (A) purchased inventory for $20,000 and sold the full amount to (B) Company for $30,000. On December 31, 20X5, (B)'s ending inventory included $6,000 of items purchased from (A). Also in 20X5, (B) purchased inventory for $50,000 and sold the units to (A) for $80,000. (A) included $20,000 of its purchase from (B) in ending inventory on December 31, 20X5.

Summary income statement data for the two companies revealed the following:

(A) Company

(B) Company

Sales

$ 400,000

$ 200,000

Income from (B)

20,500

$420,500

$200,000

Cost of Goods Sold

$250,000

$120,000

Other Expenses

70,000

35,000

Total Expenses

$(320,000)

$(155,000)

Net Income

$100,500

$45,000

Required

1. Compute the amount to be reported as sales in the 20X5 consolidated income statement.
3. Compute the amount to be reported as cost of goods sold in the 20X5 consolidated income statement.
5. What amount of income will be assigned to the noncontrolling shareholders in the 20X5 consolidated income statement?
7. What amount of income will be assigned to the controlling interest in the 20X5 consolidated income statement?

Q3:

(X) Company purchased 40 percent ownership of (Y) Corporation on January 1, 20X1, for $150,000. (Y)'s balance sheet at the time of acquisition was as follows:

(Y) CORPORATION

Balance Sheet

January 1, 20X1

Cash

$ 30,000

Current Liabilities

$40,000

Accounts Receivable

120,000

Bonds Payable

200,000

Inventory

80,000

Common Stock

200,000

Land

150,000

Additional Paid-In Capital

40,000

Buildings & Equipment

$ 300,000

Less: Accumulated Depreciation

(120,000)

180,000

Retained Earnings

80,000

Total Assets

$560,000

Total Liabilities & Equities

$560,000

During 20X1 (Y) Corporation reported net income of $30,000 and paid dividends of $9,000. The fair values of (Y)'s assets and liabilities were equal to their book values at the date of acquisition, with the exception of buildings and equipment, which had a fair value $35,000 above book value. All buildings and equipment had remaining lives of five years at the time of the business combination. The amount attributed to goodwill as a result of its purchase of (Y) shares is not impaired.RequiredWhat amount of investment income will (X) Company record during 20X1 under equity-method accounting?What amount of income will be reported under the cost method?What will be the balance in the investment account on December 31, 20X1, under (1) cost-method and (2) equity-method accounting?