In: Accounting
ProForm acquired 80 percent of ClipRite on June 30, 2017, for $1,440,000 in cash. Based on ClipRite's acquisition-date fair value, an unrecorded intangible of $800,000 was recognized and is being amortized at the rate of $19,000 per year. No goodwill was recognized in the acquisition. The noncontrolling interest fair value was assessed at $360,000 at the acquisition date. The 2018 financial statements are as follows:
ProForm | ClipRite | ||||||
Sales | $ | (890,000 | ) | $ | (780,000 | ) | |
Cost of goods sold | 580,000 | 445,000 | |||||
Operating expenses | 190,000 | 145,000 | |||||
Dividend income | (56,000 | ) | 0 | ||||
Net income | $ | (176,000 | ) | $ | (190,000 | ) | |
Retained earnings, 1/1/18 | $ | (2,200,000 | ) | $ | (940,000 | ) | |
Net income | (176,000 | ) | (190,000 | ) | |||
Dividends declared | 190,000 | 70,000 | |||||
Retained earnings, 12/31/18 | $ | (2,186,000 | ) | $ | (1,060,000 | ) | |
Cash and receivables | $ | 490,000 | $ | 390,000 | |||
Inventory | 380,000 | 790,000 | |||||
Investment in ClipRite | 1,440,000 | 0 | |||||
Fixed assets | 1,900,000 | 1,050,000 | |||||
Accumulated depreciation | (900,000 | ) | (200,000 | ) | |||
Totals | $ | 3,310,000 | $ | 2,030,000 | |||
Liabilities | $ | (824,000 | ) | $ | (670,000 | ) | |
Common stock | (300,000 | ) | (300,000 | ) | |||
Retained earnings, 12/31/18 | (2,186,000 | ) | (1,060,000 | ) | |||
Totals | $ | (3,310,000 | ) | $ | (2,030,000 | ) | |
ClipRite sold ProForm inventory costing $78,000 during the last six months of 2017 for $180,000. At year-end, 30 percent remained. ClipRite sells ProForm inventory costing $245,000 during 2018 for $340,000. At year-end, 10 percent is left. With these facts, determine the consolidated balances for the following:
Consolidated Balance:
Sales
Cost of goods sold
Operating expenses
Dividend income
Net income attributable to noncontrolling interest
Inventory
Noncontrolling interest in subsidiary, 12/31/18
1.. Consolidated Sales=Sales of Company B + Sales of Company Z |
=$890000+$780000-$340000=$1330000 |
2.. Consolidated cost of Goods Sold= B Company+Z Company- Intra Entity Transfer 2018-Realised Gross Profit 2017 +Deferred Gross Profit 2018 |
=$580000+$445000-$340000-$30600+$9500=$663900 |
3.. Operating Expense= B Company + Z Company + Annual Amortization |
= $190000+$145000+$19000=$316000 |
4.. Dividend income will be 0 because elimited dividend paid by Subsidary during consolidation. |
5. NCI Income = (Net Income of Company B + Net Incoe of Company Z+ Unamortised expense)X Percentage of NCI |
=($176000+$190000)X20%= $73200 |
6.. Consolidated Inventory= Inventory of Company B + Inventory of Company Z- Unrealised Profit |
=$380000+$790000-$30600-$9500=$1129900 |
Working Note:- |
Unrealised Gross Profit2017= ( Sales-Cost of Inventory) X % left Inventory |
=($180000-$78000)X30%=$30600 |
Unrealised Gross Profit2018= ( Sales-Cost of Inventory) X % left Inventory |
=($340000-$245000)X10%=$9500 |