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

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 2011 consolidation worksheet entry with regard to the unrealized gross profit of the 2010 intra-entity transfer of merchandise?

Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012, respectively. Parker sold the land it purchased from Stark in 2010 for $92,000 in 2012. -Compute the gain or loss on the intra-entity sale of land.

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

Yoderly Co. ,a wholly owned subsidiary of Nelson Corp. ,sold goods to Nelson near the end of 2011.The goods had cost Yoderly $105,000 and the selling price was $140,000.Nelson had not sold any of the goods by the end of the year. Required: Prepare Consolidation Entry TI andConsolidation Entry G that are required for 2011.

On January 1, 2011, 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, 2011, before preparing the consolidated worksheet, the financial statements appeared as follows: Revenues \ 420,000 \ 280,000 Cost of goods sold (196,000) (112,000 Operating expenses (28,000) (14,000) Net income \1 96,000 \ 154,000 Retained earnings, 1/1/11 \ 420,000 \ 210,000 Net income (above) 196,000 154,000 Dividends paid Retained earnings, 12/31/11 \ Cash and receivables \ 294,000 \ 126,000 Inventory 210,000 154,000 Investment in Strong Corp 364,000 0 Equipment (net) 616,000 420.000 Total assets \ 1.484,000 \ 700,000 Liabilities \ 588,000 \ 196,000 Common stock 280,000 140,000 Retained earnings, 12/31/11 (above) 616,000 364,000 Total liabilities and stockholders' equity \ 1,484,000 \ 700,000 During 2011, 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. -What is the total of consolidated revenues?

Polar sold a building to Icecap on January 1,2010 for $112,000,although the book value of this asset was only $70,000 on that date.The building had a five-year remaining useful life and was to be depreciated using the straight-line method with no salvage value. Required: For the consolidated financial statements for 2011,determine the balances that would appear for the following accounts: (1)Buildings (net), (2)Operating expenses,and (3)Noncontrolling Interest in Subsidiary's Net Income.

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 2010,which of the following choices would be a debit entry to eliminate the intra-entity transfer of inventory?

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2010. One-third of the inventory is sold by Carter in 2010. -In the consolidation worksheet for 2011,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 2010 intra-entity sales?

Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012, respectively. Parker sold the land it purchased from Stark in 2010 for $92,000 in 2012. -Which of the following will be included in a consolidation entry for 2010?

Virginia Corp. owned all of the voting common stock of Stateside Co. Both companies use the perpetual inventory method, and Virginia decided to use the partial equity method to account for this investment. During 2010, Virginia made cash sales of $400,000 to Stateside. The gross profit rate was 30% of the selling price. By the end of 2010, Stateside had sold 75% of the goods to outside parties for $420,000 cash. -Prepare journal entries for Virginia and Stateside to record the sales/purchases during 2010.

Hambly Corp.owned 80% of the voting common stock of Stroban Co.During 2011,Stroban sold a parcel of land to Hambly.The land had a book value of $82,000 and was sold to Hambly for $145,000.Stroban's reported net income for 2011 was $119,000. Required: What was the noncontrolling interest's share of Stroban Co.'s net income?

On January 1, 2011, 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, 2011, before preparing the consolidated worksheet, the financial statements appeared as follows: Revenues \ 420,000 \ 280,000 Cost of goods sold (196,000) (112,000 Operating expenses (28,000) (14,000) Net income \1 96,000 \ 154,000 Retained earnings, 1/1/11 \ 420,000 \ 210,000 Net income (above) 196,000 154,000 Dividends paid Retained earnings, 12/31/11 \ Cash and receivables \ 294,000 \ 126,000 Inventory 210,000 154,000 Investment in Strong Corp 364,000 0 Equipment (net) 616,000 420.000 Total assets \ 1.484,000 \ 700,000 Liabilities \ 588,000 \ 196,000 Common stock 280,000 140,000 Retained earnings, 12/31/11 (above) 616,000 364,000 Total liabilities and stockholders' equity \ 1,484,000 \ 700,000 During 2011, 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. -What is the consolidated total for inventory at December 31,2011?

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 -Compute the noncontrolling interest in Gargiulo's net income for 2011.

On January 1, 2011, 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, 2011, before preparing the consolidated worksheet, the financial statements appeared as follows: Revenues \ 420,000 \ 280,000 Cost of goods sold (196,000) (112,000 Operating expenses (28,000) (14,000) Net income \1 96,000 \ 154,000 Retained earnings, 1/1/11 \ 420,000 \ 210,000 Net income (above) 196,000 154,000 Dividends paid Retained earnings, 12/31/11 \ Cash and receivables \ 294,000 \ 126,000 Inventory 210,000 154,000 Investment in Strong Corp 364,000 0 Equipment (net) 616,000 420.000 Total assets \ 1.484,000 \ 700,000 Liabilities \ 588,000 \ 196,000 Common stock 280,000 140,000 Retained earnings, 12/31/11 (above) 616,000 364,000 Total liabilities and stockholders' equity \ 1,484,000 \ 700,000 During 2011, 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. -What is the total of consolidated cost of goods sold?

On January 1, 2011, 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, 2011, before preparing the consolidated worksheet, the financial statements appeared as follows: Revenues \ 420,000 \ 280,000 Cost of goods sold (196,000) (112,000 Operating expenses (28,000) (14,000) Net income \1 96,000 \ 154,000 Retained earnings, 1/1/11 \ 420,000 \ 210,000 Net income (above) 196,000 154,000 Dividends paid Retained earnings, 12/31/11 \ Cash and receivables \ 294,000 \ 126,000 Inventory 210,000 154,000 Investment in Strong Corp 364,000 0 Equipment (net) 616,000 420.000 Total assets \ 1.484,000 \ 700,000 Liabilities \ 588,000 \ 196,000 Common stock 280,000 140,000 Retained earnings, 12/31/11 (above) 616,000 364,000 Total liabilities and stockholders' equity \ 1,484,000 \ 700,000 During 2011, 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. -What is the consolidated total of noncontrolling interest appearing in the balance sheet?

On January 1, 2010, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2010 and 2011, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes. -Compute the gain recognized by Smeder Company relating to the equipment for 2010.

Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012, respectively. Parker sold the land it purchased from Stark in 2010 for $92,000 in 2012. -Which of the following will be included in a consolidation entry for 2011?

Which of the following statements is true regarding an intra-entity sale of land?

Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012, respectively. Parker sold the land it purchased from Stark in 2010 for $92,000 in 2012. -Compute income from Stark reported on Parker's books for 2011.

Patti Company owns 80% of the common stock of Shannon, Inc. In the current year, Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000. For the same period, Shannon has sales of $200,000 and cost of goods sold of $160,000. During the year, Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup. At the end of the year, Shannon still possesses 30 percent of this inventory. -Assume the same information,except Shannon sold inventory to Patti.Compute consolidated sales.