Question

ProForm acquired 60 percent of ClipRite on June 30, 2017, for $960,000 in cash. Based on ClipRite's acquisition-date fair value, an unrecorded intangible of $700,000 was recognized and is being amortized at the rate of $17,000 per year. No goodwill was recognized in the acquisition. The noncontrolling interest fair value was assessed at $640,000 at the acquisition date. The 2018 financial statements are as follows:

	ProForm				ClipRite
Sales	$	(870,000	)		$	(740,000	)
Cost of goods sold		570,000				435,000
Operating expenses		170,000				135,000
Dividend income		(30,000	)			0
Net income	$	(160,000	)		$	(170,000	)
Retained earnings, 1/1/18	$	(1,600,000	)		$	(920,000	)
Net income		(160,000	)			(170,000	)
Dividends declared		170,000				50,000
Retained earnings, 12/31/18	$	(1,590,000	)		$	(1,040,000	)
Cash and receivables	$	470,000			$	370,000
Inventory		360,000				770,000
Investment in ClipRite		960,000				0
Fixed assets		1,700,000				950,000
Accumulated depreciation		(300,000	)			(100,000	)
Totals	$	3,190,000			$	1,990,000
Liabilities	$	(800,000	)		$	(150,000	)
Common stock		(800,000	)			(800,000	)
Retained earnings, 12/31/18		(1,590,000	)			(1,040,000	)
Totals	$	(3,190,000	)		$	(1,990,000	)

ClipRite sold ProForm inventory costing $76,000 during the last six months of 2017 for $160,000. At year-end, 30 percent remained. ClipRite sells ProForm inventory costing $235,000 during 2018 for $320,000. At year-end, 10 percent is left. With these facts, determine the consolidated balances for the following

ClipRite sold ProForm inventory costing $76,000 during the last six months of 2017 for $160,000. At year-end, 30 percent remained. ClipRite sells ProForm inventory costing $235,000 during 2018 for $320,000. At year-end, 10 percent is left. With these facts, determine the consolidated balances for the following:

	Consolidated Totals
Sales
Cost of Goods Sold
Operating Expenses
Dividend Income
Inventory
Non-Controlling Interest in Subsidiary, 12/31/18
Net Income attributable to Noncontrolling Interest

Answer 1

We need to pass the following journl entry as workpaper elimination for incompany goods transacion in 2018
			Amount in $
Date	Account Title and Explanation		Debit	Credit
December 31, 2018	Intercompany sales		320000
	Retained earning(Profit in beginning inventory)		25200		=30%*(160000-76000)
		Intercompany cost of goods sold		235000
		Cost of goods sold(Intercompany profit in cost of goods sold)		101700	=90%*(320000-235000)+30%*(160000-76000)
		Ending Inventory(profit in ending inventory)		8500	=90%*(320000-235000)
	Calculation
		Beginning inventory	48000		=160000*30%
		Purchases	320000
		Cost of goods available for sale	368000
		Ending Inventory	32000
		Cost of goods sold(COGS)	336000
		Intercompany profit in COGS	101700		=90%*(320000-235000)+30%*(160000-76000)
		Intercompany profit in ending inventory	8500		=10%*(320000-235000)
Requirement
			Proform	Clipride	Conolidation		Consolidated
					Debit	Credit
		Sales	-870000	-740000	320000		-1290000
		Cost of goods sold	570000	435000		336700	668300
		Operating expenses	170000	135000	17000		322000
		Dividend Income	30000			30000	0
		Inventory	360000	770000		8500	1121500