On January 1, 2016, Pinto Company Purchased an 80% Interest

Essay

On January 1, 2016, Pinto Company purchased an 80% interest in Sands Inc.for $1,000,000.The equity balances of Sands at the time of the purchase were as follows:
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$$\begin{array} { l r } \text { Common stock ( } \$ 10 \mathrm { par } ) & \$ 100,000 \\\text { Paid-in capital in excess of par } & 400,000 \\\text { Retained earnings } & 500,000\end{array}$$ Any excess of cost over book value is attributable to goodwill.
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No dividends were paid by either firm during 2016.The following trial balances were prepared for Pinto Company and its subsidiary, Sands Inc., on December 31, 2016:
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$$\begin{array} { l r r } & \text { Pinto } & \text { Sands } \\\text { Cash } & 120,000 & 70,000 \\\text { Accounts receivable } & 240,000 & 197,000 \\\text { Inventory } & 200,000 & 176,000 \\\text { Land } & 600,000 & 180,000 \\\text { Buildings and equipment } & 1,100,000 & 800,000 \\\text { Accumulated depreciation } & ( 180,000 ) & ( 120,000 ) \\\text { Investment in Sands } & 1,000,000 & \\\text { Accounts payable } & ( 110,000 ) & ( 50,000 ) \\\text { Common stock, \$10 par } & ( 800,000 ) & ( 100,000 ) \\\text { Paid-in capital in excess of par } & ( 660,000 ) & ( 400,000 ) \\\text { Retained earnings } & ( 1,340,000 ) & ( 650,000 ) \\\text { Sales } & ( 600,000 ) & ( 300,000 ) \\\text { Other income } & ( 40,000 ) & ( 15,000 ) \\\text { Cost of goods sold } & 320,000 & 180,000 \\\text { Other expenses } & 150,000 & 32,000 \\{ \text { Total } } & - & -\end{array}$$ Sands sold a machine to Pinto Company for $40,000 on January 1, 2016.The machine cost Sands $50,000, and $25,000 of accumulated depreciation had been recorded as of the sale date.The machine had a 5-year remaining life and no salvage value.Pinto Company is using straight-line depreciation.
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Since the purchase date, Pinto has sold merchandise for resale to Sands, Inc.at a mark-up on cost of 25%.Sales during 2016 were $150,000.The inventory of these goods held by Sands was $15,000 on January 1, 2016, and $18,000 on December 31, 2016.
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Required:
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Prepare a consolidated income statement for 2016, including income distribution schedules to support your distribution of income to the non-controlling and controlling interest interests.