In: Accounting
Protrade Corporation acquired 70 percent of the outstanding voting stock of Seacraft Company on January 1, 2017, for $420,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft's identifiable assets and liabilities at a collective net fair value of $715,000 and the fair value of the 30 percent noncontrolling interest was $180,000. No excess fair value over book value amortization accompanied the acquisition. The following selected account balances are from the individual financial records of these two companies as of December 31, 2018: Protrade Seacraft Sales $ 830,000 $ 550,000 Cost of goods sold 385,000 292,000 Operating expenses 169,000 124,000 Retained earnings, 1/1/18 930,000 370,000 Inventory 365,000 129,000 Buildings (net) 377,000 176,000 Investment income Not given 0 Each of the following problems is an independent situation: a.Assume that Protrade sells Seacraft inventory at a markup equal to 60 percent of cost. Intra-entity transfers were $109,000 in 2017 and $129,000 in 2018. Of this inventory, Seacraft retained and then sold $47,000 of the 2017 transfers in 2018 and held $61,000 of the 2018 transfers until 2019. Determine balances for the following items that would appear on consolidated financial statements for 2018: b.Assume that Seacraft sells inventory to Protrade at a markup equal to 60 percent of cost. Intra-entity transfers were $69,000 in 2017 and $99,000 in 2018. Of this inventory, $40,000 of the 2017 transfers were retained and then sold by Protrade in 2018, whereas $54,000 of the 2018 transfers were held until 2019. Determine balances for the following items that would appear on consolidated financial statements for 2018: c.Protrade sells Seacraft a building on January 1, 2017, for $118,000, although its book value was only $69,000 on this date. The building had a five-year remaining life and was to be depreciated using the straight-line method with no salvage value. Determine balances for the following items that would appear on consolidated financial statements for 2018:
a. | Cost of goods sold | |
Inventory | ||
Net income attributable to noncontrolling interest | ||
b. | Cost of goods sold | |
Inventory | ||
Net income attributable to noncontrolling interest | ||
c. | Buildings (net) | |
Operating expenses | ||
Net income attributable to noncontrolling interest |