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

Pot Co. holds 90% of the common stock of Skillet Co. During 2011, 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 2011.What are consolidated sales and cost of goods sold for 2011?

Several years ago Polar Inc.acquired an 80% interest in Icecap Co.The book values of Icecap's asset and liability accounts at that time were considered to be equal to their fair values.Polar's acquisition value corresponded to the underlying book value of Icecap so that no allocations or goodwill resulted from the transaction. The following selected account balances were from the individual financial records of these two companies as of December 31,2011: Sales Cost of goods sold Operating expenses Retained earnings, 1/1/11 Inventory Buildings (net) Investment income Polar quad896,000 406,000 210,000 1,036,000 484,000 501,000 not given Icecap \ 504,000 276,000 147,000 252,000 154,000 220,000 -Assume that Icecap sold inventory to Polar at a markup equal to 25% of cost.Intra-entity transfers were $70,000 in 2010 and $112,000 in 2011.Of this inventory,$29,000 of the 2010 transfers were retained and then sold by Polar in 2011 whereas $49,000 of the 2011 transfers were held until 2012. Required: For the consolidated financial statements for 2011,determine the balances that would appear for the following accounts: (1)Cost of Goods Sold, (2)Inventory,and (3)Noncontrolling Interest in Subsidiary's Net Income.

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. -Compute consolidated cost of goods sold.

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 2010 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 relating to the land that will be reported in consolidated net income for 2012.