Question

In: Accounting

Yosef Corporation acquired 90% of the outstanding voting stock of Randeep Inc. on January 1, Year...

Yosef Corporation acquired 90% of the outstanding voting stock of Randeep Inc. on January 1, Year 6. During Year 6, intercompany sales of inventory of $45,000 (original cost of $27,000) were made. Only 20% of this inventory was still held within the consolidated entity at the end of Year 6 and was sold in Year 7. Intercompany sales of inventory of $60,000 (original cost of $33,000) occurred in Year 7. Of this merchandise, 30% had not been resold to outside parties by the end of the year.

At the end of Year 7, selected figures from the two companies’ financial statements were as follows:   

Yosef Randeep
Inventory $70,000 $45,000
Retained Earning, beg. of year 500,000 300,000
Net Income 150,000 55,000
Dividends Declared 50,000 20,000
Retained Earnings, End of Year 600,000 335,000

Required:

(a) Assume that all intercompany sales were upstream. Calculate the amount to be reported on the Year 7 consolidated financial statements for the following accounts/items:

(i) Consolidated net income

ii) Consolidated net income attributable to the controlling and non­controlling interest

(iii) Deferred income tax asset

(iv) Inventory

(v) Assume Randeep's retained earnings at acquisition date January 1, Year 6 was $140,000. Calculate the Parent's (Yosef's) consolidated retained earnings balance at January 1, year 7 AND December 31, year 7

Solutions

Expert Solution

Question 1 and 2 Consolidated Net income and attribution betweeen controlling and non contolling interest
Particular Yosef Randeep
Income for the year              1,50,000                55,000
Less- Intercompany Upstream adjustment for inventory
ie. (60000-33000)*30%		                 -8,100
             1,50,000                46,900
1 Consolidated net Income              1,96,900
2 Attributable to the controlling interest              1,92,210
Attributable to the non­controlling interest                    4,690 (10% of Randeep Net income)
Question 3 Deferred tax Asset
Deferred tax Asset would be created on the unrelaised profit for the year 7 of Rs. 8100
Deferred Tax Asset to be recognised in the books- 8100 * 21% (Assumed tax rates in US tax laws)
ie. 1701
Question 4 Inventory
Particular Yosef Randeep Total
Inventory                 70,000                45,000 1,15,000
Less - Intercompany Adjustment for Upstream transaction                  -8,100        -8,100
Total                 61,900                45,000 1,06,900
i.e.- Inventory is $ 106,900
Question 5 Retained earning as on 1 Jan Year 7
Particular Yosef Randeep
Given Retained earning as on 1 Jan year 7         5,00,000         3,00,000
Less- Retained earning as on acquisition date        -1,40,000
        5,00,000         1,60,000
Less - Adjustment for upstream inventory (45000-27000) *20%             -3,600
Adjusted retained earning         5,00,000         1,56,400
Less - Minority Interest           -15,640
Retained earning without minority interest         5,00,000         1,40,760
Consolidated retained earning         6,40,760
Retained earning as on 31 Dec Year 7
Particular Yosef Randeep
Opening Retained earning         5,00,000         1,56,400
Add- Unrealised Inventory gain (Intercompany Sales) for Year 6               3,600
Add - Adj profits during the year (Refer Question 1 and 2)         1,50,000            46,900
        6,50,000         2,06,900
Less- Dividend declared to be shown seperately           -50,000           -20,000
Adjusted retained earning         6,00,000         1,86,900
Less - Minority Interest           -18,690
Retained earning without minority interest         6,00,000         1,68,210
Consolidated retained earning         7,68,210

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Placid Lake Corporation acquired 90 percent of the outstanding voting stock of Scenic, Inc., on January...
Placid Lake Corporation acquired 90 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2017, when Scenic had a net book value of $490,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $7,000 per year. Placid Lake's 2018 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $390,000. Scenic reported net income of $200,000. Placid Lake declared $190,000 in dividends during this period;...
Placid Lake Corporation acquired 90 percent of the outstanding voting stock of Scenic, Inc., on January...
Placid Lake Corporation acquired 90 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2017, when Scenic had a net book value of $490,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $7,000 per year. Placid Lake's 2018 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $390,000. Scenic reported net income of $200,000. Placid Lake declared $190,000 in dividends during this period;...
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2017,...
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2017, in exchange for $6,305,500 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,105,000 including retained earnings of $1,605,000. At the acquisition date, Allison prepared the following fair value allocation schedule for its newly acquired subsidiary: Consideration transferred $ 6,305,500 Mathias stockholders' equity 2,105,000 Excess fair...
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020,...
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,039,000 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,040,000 including retained earnings of $1,540,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred $ 6,039,000 Mathias stockholders' equity 2,040,000 Excess fair over...
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020,...
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,387,500 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,125,000 including retained earnings of $1,625,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred $ 6,387,500 Mathias stockholders' equity 2,125,000 Excess fair over...
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020,...
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,387,500 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,125,000 including retained earnings of $1,625,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred $ 6,387,500 Mathias stockholders' equity 2,125,000 Excess fair over...
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2017,...
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2017, in exchange for $6,162,000 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,070,000 including retained earnings of $1,570,000. At the acquisition date, Allison prepared the following fair value allocation schedule for its newly acquired subsidiary: Consideration transferred $ 6,162,000 Mathias stockholders' equity 2,070,000 Excess fair...
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020,...
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $5,957,000 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,020,000 including retained earnings of $1,520,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred $ 5,957,000 Mathias stockholders' equity 2,020,000 Excess fair over...
On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed,...
On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed, Inc., for $1,161,000 in cash and stock options. At the acquisition date, NetSpeed had common stock of $1,220,000 and Retained Earnings of $61,000. The acquisition-date fair value of the 10 percent noncontrolling interest was $129,000. QuickPort attributed the $9,000 excess of NetSpeed's fair value over book value to a database with a five-year remaining life. During the next two years, NetSpeed reported the following:...
On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed,...
On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed, Inc., for $1,152,000 in cash and stock options. At the acquisition date, NetSpeed had common stock of $1,210,000 and Retained Earnings of $60,500. The acquisition-date fair value of the 10 percent noncontrolling interest was $128,000. QuickPort attributed the $9,500 excess of NetSpeed's fair value over book value to a database with a five-year remaining life. During the next two years, NetSpeed reported the following:...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT