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Pitino acquired 80 percent of Brey's outstanding shares on January 1, 2019, in exchange for $369,000...

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 )
  1. What was the annual amortization resulting from the acquisition-date fair-value allocations?

  2. Were the intra-entity transfers upstream or downstream?

  3. What intra-entity gross profit in inventory existed as of January 1, 2021?

  4. What intra-entity gross profit in inventory existed as of December 31, 2021?

  5. What amounts make up the $59,540 Equity Earnings of Brey account balance for 2021?

  6. What is the net income attributable to the noncontrolling interest for 2021?

  7. What amounts make up the $456,000 Investment in Brey account balance as of December 31, 2021?

  8. Prepare the 2021 worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances.

  9. Without preparing a worksheet or consolidation entries, determine the consolidation balances for these two companies.

I ONLY NEED QUESTIONS 7,8, AND 9

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