Several years ago Polar Inc. acquired an 80% interest in Icecap Co. The book values of...

Several years ago Polar Inc. acquired an 80% interest in Icecap Co. The book values of Icecap's asset and liability accounts at that time were considered to be equal to their fair values. Polar’s acquisition value corresponded to the underlying book value of Icecap so that no allocations or goodwill resulted from the transfer. The following selected account balances were from the individual financial records of these two companies as of December 31, 2018: Assume that Icecap sold inventory to Polar at a markup equal to 25% of cost. Intra-entity transfers were $70,000 in 2017 and $112,000 in 2018. Of this inventory, $29,000 of the 2017 transfers were retained and then sold by Polar in 2018, whereas $49,000 of the 2018 transfers was held until 2019. Required: For the consolidated financial statements for 2018, determine the balances that would appear for the following accounts: (i) Cost of Goods Sold; (ii) Inventory; and (iii) Net income attributable to the noncontrolling interest.

( Please I need examples for each point and for the “strategic alliances” each one of the risks should be answered with examples.)

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Expert Solution

Solution (i)	Cost of Goods Sold
	Parent company = Polar Inc.
	Subsidiary company= Icecap Co.

	Inventory sold by Icecap to polar
	= Cost + 25% of cost of 20% of sale
		2017	2018
	Inter- Entity Transfer	70000	112000
	Unrealized Profit margin %	20.00%	20.00%
	Unrealized Profit margin $	-14000	-22400
	Cost of good sold (sale - Unrealized Profit margin)	56000	89600

Solution (ii)	Inventory
		2017	2018
	Retained inventory	29000	49000
	Unrealized Profit margin %	20.00%	20.00%
	Unrealized Profit margin $	-5800	-9800
	Cost of inventory (Retained inventory- Unrealized Profit margin)	23200	39200

Solution (iii)		2017	2018
	Inter- Entity Transfer	70000	112000
	Retained inventory	-29000	-49000
	Sale of inventory	41000	63000
	Unrealized Profit margin %	20.00%	20.00%
	Unrealized Profit margin $	8200	12600
	Net income attributable to non-controlling interest % (100-80)	20%	20%
	Net income attributable to non controlling interest $	1640	2520

ekkarill92 answered 1 year ago

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