Question $4$: PF Consolidated Inc. provided consulting services to its subsidiary, Sessions Athletic Gear, during $2020.$ PF Consolidated charged $$5,000,000$ of travel, salary, overhead and supplies costs to its administrative expenses account, and charged Sessions $$8,000,000$ for the services. By December $31,2020,$ the end of PF$$s accounting year, Sessions has paid all but $$100,000$ of the balance due to PF$.$ Sessions categorizes the services as administrative.

Required

a$.$ What balances appear in the December $31,2020,$ trial balances of PF and Sessions with respect to these intercompany services? What balances should appear on the consolidated financial statements?

Use negative signs with answers to indicate a Credit $($Cr$)$ balance.

Enter answers using all zeros $($do not abbreviate answers to millions or thousands$).$

PF Consolidated

Inc.

Dr $($Cr$)$ Sessions

Athletic Gear

Dr $($Cr$)$ Consolidated

Balances

Dr $($Cr$)$

Accounts receivable Answer $1$

$0$

Answer $2$

$0$

Answer $3$

$0$

Accounts payable Answer $4$

$0$

Answer $5$

$0$

Answer $6$

$0$

Consulting revenue Answer $7$

$0$

Answer $8$

$0$

Answer $9$

$0$

Administrative expenses Answer $10$

$0$

Answer $11$

$0$

Answer $12$

$0$

b$.$ Prepare the working paper eliminating entries needed for these intercompany services at December $31,2020.$

Enter answers using all zeros $($do not abbreviate answers to millions or thousands$).$

Description Debit Credit

Answer $13$

Answer $14$

$0$

Answer $15$

$0$

Answer $16$

Answer $17$

$0$

Answer $18$

$0$

To eliminate intercompany receivables$/$payables$.$

Answer $19$

Answer $20$

$0$

Answer $21$

$0$

Answer $22$

Answer $23$

$0$

Answer $24$

$0$

To eliminate intercompany revenues$/$expenses$.$ Question $7$: Condensed income statements for Pon and its $80$ percent$-$owned subsidiary, Star, appear below.

Condensed Income Statements Pon Star

Sales $$9,000,000$ $$4,000,000$

Equity in net income of Star $439,000--$

Cost of goods sold $(6,000,000)(2,500,000)$

Other expenses $(2,000,000)(600,000)$

Net income $$1,439,000$ $$900,000$

Intercompany sales are $$1,500,000.$ Unconfirmed intercompany profit in Pon$$s beginning inventory is $$100,000,$ and unconfirmed intercompany profit in Pon$$s ending inventory is $$120,000.$ Unconfirmed intercompany profit in Star$$s beginning inventory is $$90,000,$ and unconfirmed intercompany profit in Star$$s ending inventory is $$50,000.$ At the date of combination four years ago, previously unrecorded identifiable intangibles $(8-$year life, straight$-$line$)$ of $$800,000$ were recognized. Because the acquisition cost included a control premium, total goodwill recognized at the date of acquisition is shared with the noncontrolling interest in a $90$:$10$ ratio. This year$$s goodwill impairment loss is $$250,000.$

Required

a$.$ Prepare a schedule to compute Pon$$s equity in net income and the noncontrolling interest in net income.

Use negative signs with answers that reduce net income amounts.

Enter answers using all zeros $($do not abbreviate to millions or thousands$).$

Total Equity

in NI Noncontrolling

Interest in NI

Star$$s reported net income Answer $1$

Answer $2$

Answer $3$

Amortization of identifiable intangibles Answer $4$

Answer $5$

Answer $6$

Goodwill impairment loss Answer $7$

Answer $8$

Answer $9$

Confirmed profit in BI $-$ upstream Answer $10$

Answer $11$

Answer $12$

Confirmed profit in BI $-$ downstream Answer $13$

Answer $14$

Answer $15$

Unconfirmed profit in EI $-$ upstream Answer $16$

Answer $17$

Answer $18$

Unconfirmed profit in EI $-$ downstream Answer $19$

Answer $20$

Answer $21$

Answer $22$

Answer $23$

Answer $24$

b$.$ Prepare a condensed consolidated income statement for Pon and Star.

Do not use negative signs with any of your answers below.

Enter answers using all zeros $($do not abbreviate to millions or thousands$).$

Pon and Star

Consolidated Income Statement

Sales Answer $25$

Cost of goods sold Answer $26$

Other expenses Answer $27$

Consolidated net income Answer $28$

Less consolidated NI attributed to NCI Answer $29$

Consolidated net income attributed to controlling interest Answer $30$