Exam 5: Consolidated Financial Statements - Intra-Entity Asset Transactions

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 noncontrolling interest?

Gentry Inc.acquired 100% of Gaspard Farms on January 5,2010.During 2010,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 2011,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 2011,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 2011?

Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2010. 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 2011,which of the following choices would be a debit entry to eliminate unrealized intra-entity gross profit with regard to the 2010 intra-entity sales?

Justings Co.owned 80% of Evana Corp.During 2011,Justings sold to Evana land with a book value of $48,000.The selling price was $70,000.In its accounting records,Justings should

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, 2010. On January 1, 2010, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years. On April 1, 2010Simon 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: 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 2010.

Edgar Co. acquired 60% of Stendall Co. on January 1, 2011. During 2011, Edgar made several sales of inventory to Stendall. The cost and selling price of the goods were $140,000 and $200,000, respectively. Stendall still owned one-fourth of the goods at the end of 2011. Consolidated cost of goods sold for 2011 was $2,140,000 because of a consolidating adjustment for intra-entity sales less the entire profit remaining in Stendall's ending inventory. -How would noncontrolling interest in net income have differed if the transfers had been for the same amount and cost,but from Stendall to Edgar?

Gibson Corp.owned a 90% interest in Sparis Co.Sparis frequently made sales of inventory to Gibson.The sales,which include a markup over cost of 25%,were $420,000 in 2010 and $500,000 in 2011.At the end of each year,Gibson still owned 30% of the goods.Net income for Sparis was $912,000 during 2011.What was the noncontrolling interest's share of Sparis' net income for 2011?

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, 2010. 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 \ 70,000 \ 85,000 \ 94,000 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 2012 consolidation worksheet entry with regard to the unrealized gross profit of the 2011 intra-entity transfer of merchandise?

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, 2010. 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 \ 70,000 \ 85,000 \ 94,000 Dividends paid by Gargiulo 10,000 10,000 15,000 -Compute the equity in earnings of Gargiulo reported on Posito's books for 2010.

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, 2010. 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 \ 70,000 \ 85,000 \ 94,000 Dividends paid by Gargiulo 10,000 10,000 15,000 -For consolidation purposes,what amount would be debited to cost of goods sold for the 2011 consolidation worksheet with regard to the unrealized gross profit of the 2011 intra-entity transfer of merchandise?

Clemente Co. owned all of the voting common stock of Snider Co. On January 2, 2010, 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. -During 2010,Von Co.sold inventory to its wholly-owned subsidiary,Lord Co.The inventory cost $30,000 and was sold to Lord for $44,000.From the perspective of the combination,when is the $14,000 gain realized?

Clemente Co. owned all of the voting common stock of Snider Co. On January 2, 2010, 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 31,2010?

An intra-entity sale took place whereby the transfer price was less than the book value of a depreciable asset.Which statement is true for the year following the sale?

On January 1,2011,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 2011 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 2011 would have been

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, 2010. On January 1, 2010, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years. On April 1, 2010Simon 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: Net income \ 100,000 \ 120,000 \ 130,000 Dividends 40,000 50,000 60,000 -Compute the gain on transfer of equipment reported by Wilson for 2010.

Pepe, Incorporated acquired 60% of Devin Company on January 1, 2010. On that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years. Devin reported net income of $300,000 and $325,000 for 2010 and 2011, respectively. Pepe uses the equity method to account for its investment in Devin. -Compute the income from Devin reported on Pepe's books for 2011.

Pepe, Incorporated acquired 60% of Devin Company on January 1, 2010. On that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years. Devin reported net income of $300,000 and $325,000 for 2010 and 2011, respectively. Pepe uses the equity method to account for its investment in Devin. -Compute the noncontrolling interest in the net income of Devin for 2011.

Pepe, Incorporated acquired 60% of Devin Company on January 1, 2010. On that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years. Devin reported net income of $300,000 and $325,000 for 2010 and 2011, respectively. Pepe uses the equity method to account for its investment in Devin. -What is the consolidated gain or loss on equipment for 2010?

Pepe, Incorporated acquired 60% of Devin Company on January 1, 2010. On that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years. Devin reported net income of $300,000 and $325,000 for 2010 and 2011, respectively. Pepe uses the equity method to account for its investment in Devin. -What is the gain or loss on equipment reported by Devin for 2010?

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, 2010. 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 \ 70,000 \ 85,000 \ 94,000 Dividends paid by Gargiulo 10,000 10,000 15,000 -Compute the equity in earnings of Gargiulo reported on Posito's books for 2012.