Exam 5: Consolidated Financial Statementsintra-Entity Asset Transactions

Gentry Inc. acquired 100% of Gaspard Farms on January 5, 2012. During 2012, Gentry sold Gaspard Farms for $625,000 goods which had cost $425,000. Gaspard Farms still owned 12% of the goods at the end of the year. In 2013, Gentry sold goods with a cost of $800,000 to Gaspard Farms for $1,000,000, and Gaspard Farms still owned 10% of the goods at year-end. For 2013, cost of goods sold was $5,400,000 for Gentry and $1,200,000 for Gaspard Farms. What was consolidated cost of goods sold for 2013?

When comparing the difference between an upstream and downstream transfer of inventory, and using the initial value method, which of the following statements is true when there is a non-controlling interest?

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2012. One-third of the inventory is sold by Walsh uses the equity method to account for its investment in Fisher. In the consolidation worksheet for 2012, which of the following choices would be a credit entry to eliminate the intra-entity transfer of inventory?

McGraw Corp. owned all of the voting common stock of both Ritter Co. and Lawler Co. During 2013, Ritter sold inventory to Lawler. The goods had cost Ritter $65,000, and they were sold to Lawler for $100,000. At the end of 2013, Lawler still held 30% of the inventory. Required: How should the sale between Lawler and Ritter be accounted for in a consolidation worksheet? Show worksheet entries to support your answer.

Norek Corp. owned 70% of the voting common stock of Thelma Co. On January 2, 2012, Thelma sold a parcel of land to Norek. The land had a book value of $32,000 and was sold to Norek for $45,000. Thelma's reported net income for 2012 was $119,000. What is the non-controlling interest's share of Thelma's net income?

Stark Company, a 90% owned subsidiary of Parker, Inc. sold land to Parker on May 1, 2012, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2012, 2013, and 2014, respectively. Parker sold the land purchased from Stark in 2012 for $92,000 in 2014. Compute the gain or loss relating to the land that will be reported in consolidated net income for 2014.

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2012. 2012 2013 2014 Purchases by Posito \ 8,000 \ 12,000 \ 15,000 Ending inventory on Posito's books 1,200 4,000 3,000 Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends. Gargiulo's net income Dividends paid by Gargiulo 10,000 10,000 15,000 Compute the non-controlling interest in Gargiulo's net income for 2012.

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2012. One-third of the inventory is sold by Carter in 2012. In the consolidation worksheet for 2013, assuming Carter uses the initial value method of accounting for its investment in Strickland, which of the following choices would be a credit entry to eliminate unrealized intra-entity gross profit with regard to the 2012 intra-entity sales?

Wilson owned equipment with an estimated life of 10 years when it was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2012. On January 1, 2012, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years. On April 1, 2012 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends: 2012 2013 2014 Net income \ 100,000 \ 120,000 \ 130,000 Dividends 40,000 50,000 60,000 Compute the amortization of gain through a depreciation adjustment for 2013 for consolidation purposes.

Clemente Co. owned all of the voting common stock of Snider Co. On January 2, 2012, Clemente sold equipment to Snider for $125,000. The equipment had cost Clemente $140,000. At the time of the sale, the balance in accumulated depreciation was $40,000. The equipment had a remaining useful life of five years and a $0 salvage value. Straight-line depreciation is used by both Clemente and Snider. At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31, 2012?

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2012. 2012 2013 2014 Purchases by Posito \ 8,000 \ 12,000 \ 15,000 Ending inventory on Posito's books 1,200 4,000 3,000 Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends. Gargiulo's net income Dividends paid by Gargiulo 10,000 10,000 15,000 Compute the non-controlling interest in Gargiulo's net income for 2014.

Wilson owned equipment with an estimated life of 10 years when it was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2012. On January 1, 2012, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years. On April 1, 2012 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends: 2012 2013 2014 Net income \ 100,000 \ 120,000 \ 130,000 Dividends 40,000 50,000 60,000 Compute Wilson's share of income from Simon for consolidation for 2013.

Pot Co. holds 90% of the common stock of Skillet Co. During 2013, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000. Included in the amounts for Pot's sales were Pot's sales for merchandise to Skillet for $140,000. There were no sales from Skillet to Pot. Intra-entity sales had the same markup as sales to outsiders. Skillet had resold all of the intra-entity purchases from Pot to outside parties during 2013. What are consolidated sales and cost of goods sold for 2013?

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2012. 2012 2013 2014 Purchases by Posito \ 8,000 \ 12,000 \ 15,000 Ending inventory on Posito's books 1,200 4,000 3,000 Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends. Gargiulo's net income Dividends paid by Gargiulo 10,000 10,000 15,000 For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2014 consolidation worksheet entry with regard to the unrealized gross profit of the 2013 intra-entity transfer of merchandise?

Pot Co. holds 90% of the common stock of Skillet Co. During 2013, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000. Included in the amounts for Pot's sales were Pot's sales of merchandise to Skillet for $140,000. There were no sales from Skillet to Pot. Intra-entity sales had the same markup as sales to outsiders. Skillet still had 40% of the intra-entity sales as inventory at the end of 2013. What are consolidated sales and cost of goods sold for 2013?

Stark Company, a 90% owned subsidiary of Parker, Inc. sold land to Parker on May 1, 2012, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2012, 2013, and 2014, respectively. Parker sold the land purchased from Stark in 2012 for $92,000 in 2014. Compute income from Stark reported on Parker's books for 2012.

On January 1, 2013, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong's stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill which has not been impaired. As of December 31, 2013, before preparing the consolidated worksheet, the financial statements appeared as follows: Pride, Inc. Strong Corp. Revenues \ 420,000 \ 280,000 Cost of goods sold (196,000) (112,000) Operating expenses (28,000) (14,000) Net income \ 196,000 \ 154,000 Retained earnings, 1/1/13 \ 420,000 \ 210,000 Net income (above) 196,000 154,000 Dividends paid 0 0 Retained earnings, 12/31/13 \ 616,000 \ 364,000 Cash and receivables \ 294,000 \ 126,000 Inventory 210,000 154,000 Investment in Strong Corp 364,000 0 Equipment (net) 616,000 Total assets \ 1,484,000 \ 700,000 Liabilities \ 588,000 \ 196,000 Common stock 280,000 140,000 Retained earnings, 12/31/13 (above) 616,000 264,000 Total liabilities and stockholders' equity \ 1,484,000 \ 700,000 During 2013, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of this purchase had been paid for by Strong by the end of the year. 60% of these goods were still in the company's possession on December 31, 2013. What is the consolidated total of non-controlling interest appearing in the balance sheet?

On January 1, 2013, Payton Co. sold equipment to its subsidiary, Starker Corp., for $115,000. The equipment had cost $125,000, and the balance in accumulated depreciation was $45,000. The equipment had an estimated remaining useful life of eight years and $0 salvage value. Both companies use straight-line depreciation. On their separate 2013 income statements, Payton and Starker reported depreciation expense of $84,000 and $60,000, respectively. The amount of depreciation expense on the consolidated income statement for 2013 would have been

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2012. One-third of the inventory is sold by Walsh uses the equity method to account for its investment in Fisher. In the consolidation worksheet for 2013, which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2012 intra-entity sales?

Which of the following statements is true concerning an intra-entity transfer of a depreciable asset?