Question

Following are several figures reported for Allister and Barone as of December 31, 2018:

	Allister		Barone
Inventory	$	650,000	$	450,000
Sales		1,300,000		1,100,000
Investment income		not given
Cost of goods sold		650,000		550,000
Operating expenses		305,000		375,000

Allister acquired 90 percent of Barone in January 2017. In allocating the newly acquired subsidiary's fair value at the acquisition date, Allister noted that Barone had developed a customer list worth $86,000 that was unrecorded on its accounting records and had a 4-year remaining life. Any remaining excess fair value over Barone's book value was attributed to goodwill. During 2018, Barone sells inventory costing $145,000 to Allister for $210,000. Of this amount, 10 percent remains unsold in Allister's warehouse at year-end.

Determine balances for the following items that would appear on Allister's consolidated financial statements for 2018:

Answer 1

Barone is a 90% Subsidary of Allister and is acquired Before 1year . So in Consolidated Income Statement we didnot have to apporation figures for months. And there is implication of intracompany transaction(mentioned in Working note 1) and unrecorded entries.

Consolidated Income Statement

	Allister	Adjustment	Barone	Adjustment	Total
Sales Revenue	1,300,000		1,100,000	-210,000intra	2,190,000
Cost Of Sales	650,000		550,000	-210,000( +6500Purp(w1)	(996,500)
Gross Profit	650,000		550,000		1,193,500
Operating Expense	(305,000)		(375,000)		(680,000)
Amortisation of customer list(W2)			(21,500)		(21,500)
Net Profit			153,500		492,000
Profit Attributable to:
Controlling interest				(492,000-14,700(NCI below))	477,300
Non-Controlling Interest				153,500 *10% (NCI %)-Less: NCI Share of PURP (6500*10%)=650	14,700

INVENTORY IN F/P

Invenorty

650,000

(450,000*90% Ownership%)=405,000

(-6500) purp

TOTAL=1,048,500

PURP ALSO HAVE AN EFFECT ON GROUP RETAINED EARNINGS.

With the given figures these are balances can be arrived.

W1)Intracompany Transaction

Sales.................................................-210,000

Cost of sales....................................(-145,000)

Total Profit Barone made................=65,000

Out of which 90% of profit is realisable since sold outside the group Remaining 10% ie,(65,000*10%=6,500) is Unrealsed Profit.

(Is just like taking something from left pocket to right)

1) deduct whole of the sales of 210,000 from both the sales and from the cost of sales (because we only want to show sales and cost of sales external to the group).

2) for % remaining inventory , ADD Purp of 6500 to Cost OF Sales(Since will be there in sales figure of Barone)

3) AND also in calculating profit attributable to NCI deduct NCI % of PURP 6500*10%=650

W2) Customer List

There is one unrecorded intangible asset by Subsidary but group recorded.

Customer List Value -86,000 /4Year (life) =21,500 per Year

Every year should review for any change in fair Value