Question
In: Accounting
Plug Products owns 80 percent of the stock of Spark Filter Company, which it acquired at...
Plug Products owns 80 percent of the stock of Spark Filter
Company, which it acquired at underlying book value on August 30,
20X6. At that date, the fair value of the noncontrolling interest
was equal to 20 percent of the book value of Spark Filter.
Summarized trial balance data for the two companies as of December
31, 20X8, are as follows:
| Plug Products | Spark Filter Company | ||||||||||||||||
| Debit | Credit | Debit | Credit | ||||||||||||||
| Cash and Accounts Receivable | $ | 158,000 | $ | 104,000 | |||||||||||||
| Inventory | 221,000 | 125,000 | |||||||||||||||
| Buildings & Equipment (net) | 278,000 | 198,000 | |||||||||||||||
| Investment in Spark Filter Company | 261,389 | ||||||||||||||||
| Cost of Goods Sold | 173,000 | 138,000 | |||||||||||||||
| Depreciation Expense | 40,000 | 30,000 | |||||||||||||||
| Current Liabilities | $ | 147,547 | $ | 87,947 | |||||||||||||
| Common Stock | 192,000 | 79,000 | |||||||||||||||
| Retained Earnings | 465,000 | 203,000 | |||||||||||||||
| Sales | 275,053 | 225,053 | |||||||||||||||
| Income from Spark Filter Company | 51,789 | ||||||||||||||||
| Total | $ | 1,131,389 | $ | 1,131,389 | $ | 595,000 | $ | 595,000 | |||||||||
On January 1, 20X8, Plug's inventory contained filters purchased
for $77,000 from Spark Filter, which had produced the filters for
$57,000. In 20X8, Spark Filter spent $117,000 to produce additional
filters, which it sold to Plug for $158,053. By December 31, 20X8,
Plug had sold all filters that had been on hand January 1, 20X8,
but continued to hold in inventory $47,416 of the 20X8 purchase
from Spark Filter.
What is the consolidated net income? I'm coming up with 126,790
but that's not correct
Solutions
Expert Solution
Answer:
| Plug | Spark Filter | Total | |
| Sales | 275053 | 225053 | 500106 |
| Less: Cost of goods sold | (173000) | (138000) | (311000) |
| Less: Depreciation expenses | (40000) | (30000) | (70000) |
| Equity Income from Spark Filter | 51789 | 51789 | |
| Net Income before Adjustment | 113842 | 57053 | 170895 |
| Add: Beginning intercompany inventory profit | 20000 | 20000 | |
| Less: Ending Intercompany Inventory profit | (12314) | (12314) | |
| Less: Income from spark filter | (51789) | (51789) | |
| Separate Net Income | 62053 | 64739 | |
| Consolidated Net Income | 126792 |
Working Notes:
Intercompany profit on Beginning inventory
Inventory price = 77000
Cost of inventory held = (57000)
Profit on Beginning Inventory = 20000
Share of plug in Beginning Inventory (80%) = 16000
Share of non controlling interest in Beginnig inventory (20%) =
4000
Intercompany profit on Ending Inventory
In 20X8
Total Inventorysold = 158053
Cost of Inventory sold = (117000)
Profit on Inventory sold = 41053
Profit Percentage (41053/158053)*100 = 25.97%
Ending Invenotry held = 47416
Profit in ending inventory (47416*25.97%) = 12314
ekkarill92 answered 2 years agoRelated Solutions
Plug Products owns 80 percent of the stock of Spark Filter Company, which it acquired at...
Plug Products owns 80 percent of the stock of Spark Filter
Company, which it acquired at underlying book value on August 30,
20X6. At that date, the fair value of the noncontrolling interest
was equal to 20 percent of the book value of Spark Filter.
Summarized trial balance data for the two companies as of December
31, 20X8, are as follows: Plug Products Spark Filter Company Debit
Credit Debit Credit Cash and Accounts Receivable $ 164,000 $ 91,000
Inventory 227,000...
Plug Products owns 80 percent of the stock of Spark Filter Company, which it acquired at...
Plug Products owns 80 percent of the stock of Spark Filter
Company, which it acquired at underlying book value on August 30,
20X6. At that date, the fair value of the noncontrolling interest
was equal to 20 percent of the book value of Spark Filter.
Summarized trial balance data for the two companies as of December
31, 20X8, are as follows:
Plug Products
Spark Filter Company
Debit
Credit
Debit
Credit
Cash and Accounts Receivable
$
151,000
$
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Inventory
231,000...
Plug Products owns 80 percent of the stock of Spark Filter Company, which it acquired at...
Plug Products owns 80 percent of the stock of Spark Filter
Company, which it acquired at underlying book value on August 30,
20X6. At that date, the fair value of the noncontrolling interest
was equal to 20 percent of the book value of Spark Filter.
Summarized trial balance data for the two companies as of December
31, 20X8, are as follows:
Plug Products
Spark Filter Company
Debit
Credit
Debit
Credit
Cash and Accounts Receivable
$
160,000
$
95,000
Inventory
232,000...
Plug Products owns 80 percent of the stock of Spark Filter Company, which it acquired at...
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was equal to 20 percent of the book value of Spark Filter.
Summarized trial balance data for the two companies as of December
31, 20X8, are as follows:
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Summarized trial balance data for the two companies as of December
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305,000
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