In: Accounting
Summer Company sells all its output at 25 percent above cost.
Parade Corporation purchases all its inventory from Summer.
Selected information on the operations of the companies over the
past three years is as follows:
Summer Company | Parade Corporation | |||||||||||||
Year | Sales to Parade Corp. | Net Income | Inventory, Dec. 31 | Operating Income | ||||||||||
20X2 | $ | 202,000 | $ | 102,000 | $ | 70,700 | $ | 157,000 | ||||||
20X3 | 177,000 | 92,000 | 106,200 | 253,000 | ||||||||||
20X4 | 273,000 | 162,000 | 145,600 | 304,000 | ||||||||||
Parade acquired 60 percent of the ownership of Summer on January 1,
20X1, at underlying book value.
Required:
Compute consolidated net income and income assigned to the
controlling interest for 20X2, 20X3, and 20X4.
20X2 (IN $)
TOTAL RESOLD ENDING INVENTORY
(a) (b=a-c) (c)
1.SALES 202,000 131300 70,700
2.COGS (1-3) 161,600 105,040 56,560
3.MARGIN (20%*1) 40,400 26260 14,140
20X3 (IN $)
TOTAL RESOLD ENDING INVENTORY
(a) (b=a-c) (c)
1.SALES 177,000 70,800 106,200
2.COGS (1-3) 141,600 56,640 84,960
3.MARGIN (20%*1) 35,400 14,160 21,240
20X4 (IN $)
TOTAL RESOLD ENDING INVENTORY
(a) (b=a-c) (c)
1.SALES 273,000 127,400 145,600
2.COGS (1-3) 218,400 101,920 116,480
3.MARGIN (20%*1) 54,600 25,480 29,120
YEAR SALES UNREALIZED NET INCOME
PROFITS INCOME NET OF UNREALIZED PROFITS
(a) (b=a*20%) (c) (d=c-b)
20X2 202,000 40,400 102,000 61,600
20X3 177,000 35,400 92,000 56,600
20X4 273,000 54,600 162,000 107,400
YEAR INVENTORY UNREALIZED OPERATING OPERATING INCOME
PROFITS INCOME NET OF UNREALIZED PROFITS
(a) (b=a*20%) (c) (d=c-b)
20X2 70,700 14,140 157,000 142,860
20X3 106,200 21,240 253,000 231,760
20X4 145,600 29,120 304,000 274,880
YEAR OPERATING INCOME INCOME ASSIGNED TO CONSOLIDATED
NET OF UNREALIZED PROFITS THE CONTROLLING INTEREST INCOME
(a) (b=60% of income net (c=a+b)
of unrealized profits)
20X2 142,860 36,960 179,820
20X3 231,760 33,960 265,720
20X4 274,880 64,440 339,320
------------HOPE THIS IS HELPFUL