Exam 7: Elimination of Unrealized Gains or Losses on Intercompany Sales of Property and Equipment

P Corporation acquired 80% of the outstanding voting stock of S Corporation when the fair values equaled the book values. On July 1,2016,P sold land to S for $300,000.The land originally cost P $200,000.S recently resold the land on October 30,2017 for $350,000. On October 1,2017,S Corporation sold equipment to P Corporation for $80,000.S originally paid $100,000 for this equipment and had accumulated depreciation of $40,000 thus far.The equipment has a five-year remaining life. Required: A.Complete the consolidated income statement for P Corporation and subsidiary for the year ended December 31,2017.

P Corporation acquired an 80% interest in S Corporation two years ago at an implied value equal to the book value of S.On January 2,2017,S sold equipment with a five-year remaining life to P for a gain of $120,000.S reports net income of $600,000 for 2017 and pays dividends of $200,000.P's Equity from Subsidiary Income for 2017 is:

On January 1,2008,Perry Company purchased a 90% interest in Sludge Company for $800,000,the same as the book value on that date.On January 1,2017,Sludge sold new equipment to Perry for $16,000.The equipment cost $11,000 and had a five year estimated life as of January 1,2017. During 2018,Perry sold merchandise to Sludge at 20% above cost in the amount (selling price)of $126,000.At the end of the year,Sludge had $42,000 of this merchandise in its ending inventory.At the beginning of 2018,Sludge had $48,000 of inventory purchased in 2017 from Perry. Required: A.Prepare all workpaper entries necessary to eliminate the effects of the intercompany sales on the consolidated financial statements for 2018. B.Calculate the amount of noncontrolling interest to be deducted from consolidated net income in the consolidated income statement for 2018.Sludge Company reported $40,000 of net income in 2018.

On January 1,2016,P Corporation sold equipment with a 3-year remaining life and a book value of $100,000 to its 70% owned subsidiary for a price of $115,000.In the consolidated workpapers for the year ended December 31,2017,an elimination entry for this transaction will include a:

P Company purchased land from its 80% owned subsidiary at a cost of $30,000 greater than it subsidiary's book value.Two years later P sold the land to an outside entity for $15,000 more than P's cost.In its current year consolidated income statement P and its subsidiary should report a gain on the sale of land of:

Pale Company owns 90% of the outstanding common stock of Shale Company.On January 1,2017,Shale Company sold equipment to Pale Company for $300,000.Shale Company had purchased the equipment for $450,000 on January 1,2006 and has been depreciating it over a 10 year life by the straight-line method.The management of Pale Company estimated that the equipment had a remaining life of 5 years on January 1,2017.In 2017,Pale Company reported $225,000 and Shale Company reported $150,000 in net income from their independent operations. Required: A.Prepare in general journal form the workpaper entries relating to the intercompany sale of equipment that are necessary in the December 31,2017 and 2018 consolidated statements workpapers.Pale Company uses the cost method to record its investment in Shale Company. B.Calculate equity in subsidiary income for 2017 and noncontrolling interest in net income for 2017

In the year an 80% owned subsidiary sells equipment to its parent company at a gain,the noncontrolling interest in consolidated income is calculated by multiplying the noncontrolling interest percentage by the subsidiary's reported net income:

In 2017,P Company sells land to its 80% owned subsidiary,S Company,at a gain of $50,000.What is the effect of this sale of land on consolidated net income assuming S Company still owns the land at the end of the year?

P Corporation acquired an 80% interest in S Corporation two years ago at an implied value equal to the book value of S.On January 2,2017,S sold equipment with a five-year remaining life to P for a gain of $180,000.S reports net income of $900,000 for 2017 and pays dividends of $300,000.P's Equity from Subsidiary Income for 2017 is:

Patriot Corporation owns 100% of Simon Company's common stock.On January 1,2017,Patriot sold equipment with a book value of $350,000 to Simon for $500,000.Simon is depreciating the equipment over a ten-year life by the straight-line method.The net adjustments to compute 2017 and 2018 consolidated income would be an increase (decrease)of:

In January 2013,S Company,an 80% owned subsidiary of P Company,sold equipment to P Company for $1,980,000.S Company's original cost for this equipment was $2,000,000 and had accumulated depreciation of $200,000.P Company continued to depreciate the equipment over its 9 year remaining life using the straight-line method.This equipment was sold to a third party on January 1,2017 for $1,440,000.What amount of gain should P Company record on its books in 2017?

P Company purchased land from its 80% owned subsidiary at a cost of $100,000 greater than it subsidiary's book value.Two years later P sold the land to an outside entity for $50,000 more than P's cost.In its current year consolidated income statement P and its subsidiary should report a gain on the sale of land of:

In January 2014,S Company,an 80% owned subsidiary of P Company,sold equipment to P Company for $990,000.S Company's original cost for this equipment was $1,000,000 and had accumulated depreciation of $100,000.P Company continued to depreciate the equipment over its 9 year remaining life using the straight-line method.This equipment was sold to a third party on January 1,2017 for $720,000.What amount of gain should P Company record on its books in 2017?