In: Accounting
Pitino acquired 80 percent of Brey's outstanding shares on January 1, 2019, in exchange for $369,000 in cash. The subsidiary's stockholders' equity accounts totaled $353,000, and the noncontrolling interest had a fair value of $92,250 on that day. However, a building (with a ten-year remaining life) in Brey's accounting records was undervalued by $19,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (five-year remaining life).
Brey reported net income from its own operations of $67,000 in 2019 and $83,000 in 2020. Brey declared dividends of $18,000 in 2019 and $22,000 in 2020.
Brey sells inventory to Pitino as follows:
Year | Cost to Brey | Transfer Price to Pitino | Inventory Remaining at Year-End (at transfer price) | ||||||
2019 | $ | 72,000 | $ | 130,000 | $ | 28,000 | |||
2020 | 97,500 | 150,000 | 40,500 | ||||||
2021 | 87,500 | 175,000 | 50,000 | ||||||
At December 31, 2021, Pitino owes Brey $19,000 for inventory acquired during the period.
The following separate account balances are for these two companies for December 31, 2021, and the year then ended.
Note: Parentheses indicate a credit balance.
Pitino | Brey | ||||||
Sales revenues | $ | (868,000 | ) | $ | (381,000 | ) | |
Cost of goods sold | 518,000 | 212,000 | |||||
Expenses | 185,700 | 64,000 | |||||
Equity in earnings of Brey | (59,540 | ) | 0 | ||||
Net income | $ | (223,840 | ) | $ | (105,000 | ) | |
Retained earnings, 1/1/21 | $ | (494,000 | ) | $ | (284,000 | ) | |
Net income (above) | (223,840 | ) | (105,000 | ) | |||
Dividends declared | 132,000 | 22,000 | |||||
Retained earnings, 12/31/21 | $ | (585,840 | ) | $ | (367,000 | ) | |
Cash and receivables | $ | 149,000 | $ | 101,000 | |||
Inventory | 270,000 | 151,000 | |||||
Investment in Brey | 456,000 | 0 | |||||
Land, buildings, and equipment (net) | 967,000 | 331,000 | |||||
Total assets | $ | 1,842,000 | $ | 583,000 | |||
Liabilities | $ | (726,160 | ) | $ | (37,000 | ) | |
Common stock | (530,000 | ) | (179,000 | ) | |||
Retained earnings, 12/31/21 | (585,840 | ) | (367,000 | ) | |||
Total liabilities and equity | $ | (1,842,000 | ) | $ | (583,000 | ) | |
What was the annual amortization resulting from the acquisition-date fair-value allocations?
Were the intra-entity transfers upstream or downstream?
What intra-entity gross profit in inventory existed as of January 1, 2021?
What intra-entity gross profit in inventory existed as of December 31, 2021?
What amounts make up the $59,540 Equity Earnings of Brey account balance for 2021?
What is the net income attributable to the noncontrolling interest for 2021?
What amounts make up the $456,000 Investment in Brey account balance as of December 31, 2021?
Prepare the 2021 worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances.
Without preparing a worksheet or consolidation entries, determine the consolidation balances for these two companies.
I ONLY NEED QUESTIONS 7,8, AND 9