Question

Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2017, for $408,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft's identifiable assets and liabilities at a collective net fair value of $535,000 and the fair value of the 20 percent noncontrolling interest was $102,000. No excess fair value over book value amortization accompanied the acquisition.

The following selected account balances are from the individual financial records of these two companies as of December 31, 2018:

	Protrade			Seacraft
Sales	$	650,000		$	370,000
Cost of goods sold		295,000			202,000
Operating expenses		151,000			106,000
Retained earnings, 1/1/18		750,000			190,000
Inventory		347,000			111,000
Buildings (net)		359,000			158,000
Investment income	Not given			0

Protrade sells Seacraft a building on January 1, 2017, for $82,000, although its book value was only $51,000 on this date. The building had a five-year remaining life and was to be depreciated using the straight-line method with no salvage value.
Determine balances for the following items that would appear on consolidated financial statements for 2018:

Buildings (net)

Operating expenses

Net income attributable to non-controlling interest

Answer 1

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Consolidated buildings (net):
Pro-trade’s buildings		$ 359,000
Sea-craft's buildings		$ 158,000
Remove write-up created by transfer	$82,000-$51,000	$ -31,000
Remove excess depreciation created by transfer	$31,000/5 Years*2	$    12,400
Consolidated buildings (net)		$ 498,400
Consolidated expenses:
Pro-trade’s book value		$ 151,000
Sea-craft's book value		$ 106,000
Remove excess depreciation on transferred building	$31,000/5 Years	$    -6,200
Consolidated expenses		$ 250,800
Net income attributable to Non-controlling interest:
Because the transfer was made downstream, it has no effect on the Non-controlling interest.
Sea Craft Sale		$ 370,000
Less:
Sea Craft COGS	$                202,000
Sea Craft Operating Expense	$                106,000	$-308,000
Net Income		$    62,000
Net income attributable to Non-controlling interest:	20%	$    12,400