Question

Upstream Eliminating Entries and Consolidated Net Income, Comprehensive Problem On January 2, 2014, Patten Company purchased a 90% interest in Sterling Company for $1,400,000. At that timeSterling Company had capital stock outstanding of $800,000 and retained earnings of $425,000. The differencebetween book value of equity acquired and the value implied by the purchase price was allocated to the follow-ing assets:

Inventory$41,667 Plant and Equipment (net) 200,000 Goodwill 88,889

The inventory was sold in 2014. The plant and equipment had a remaining useful life of 10 years onJanuary 2, 2014

During 2014 Sterling sold merchandise with a cost of $950,000 to Patten at a 20% markup above cost. AtDecember 31, 2014, Patten still had merchandise in its inventory that it purchased from Sterling for $576,000.In 2014, Sterling Company reported net income of $410,000 and declared no dividends

Required: A.Prepare in general journal form all entries necessary on the consolidated financial statements workpaper toeliminate the effects of the intercompany sales, to eliminate the investment account, and allocate the differ-ence between book value of equity acquired and the value implied by the purchase price.

B.Assume that Patten Company reports net income of $2,000,000 from its independent operations. Calculatecontrolling interest in consolidated net income.

C.Calculate noncontrolling interest in consolidated income.

Please show all your work.

Answer 1