Finder File Edit View Go Window Help A Screenshot 2024-04-08 at 1... @ ୪ .0 Mon Apr 8 1:35 AM Screenshot 2024-04-08... Sales S (732,000) $ (367,000) $ 150,000 $ Cost of goods sold 481,100 224,200 9,375 949,000 714,675 x Operating expenses 197,185 76,400 76,597 X Required A Required B Show how Pulaski determined the $423,453 Investment in Sheridan account balance. Assume that Pulaski defers 100 pc of downstream intra-entity profits against its share of Sheridan's income. Note: Amounts to be deducted should be indicated with a minus sign. Consideration transferred Equity in earnings of Sheridan (34,189) 0 34,189 Separate company net income Consolidated net income (87,904) (66,400) To noncontrolling interest To Pulaski, Incorporated Retained earnings 1/1/24 $ 384,600 Net income (774,600) (87,904) (282,800) (66,400) $ 2023 ending inventory profit deferral 350,411 Dividends declared 47,900 18,600 Excess fair value amortization 313,700 X Retained earnings 12/31/24 $ (814,604) $ (330,600) Increase in Sheridan's retained earnings 1/1/23 to 1/1/24 28,900 × 693,011 Pulaski's equity in earnings of Stinson for 2024 Cash and receivables Inventory $ 277,400 $ 150,500 260,500 131,200 Sheridan 2024 dividends declared to Pulaski Investment account balance 12/31/24 $ 1,077,611 Investment in Sheridan Buildings (net) 423,453 0 (1,057,400) ☑ (154,304) X 66,500 X $ (11,455,204) × $ 427,900 391,700 X 423,453 X 338,000 205,300 543,300 241,300 89,100 330,400 0 23,600 23,600 000 Equipment (net) Patents (net) Required A Required B > Unpatented technology Trade name Total assets Liabilities Common stock Noncontrolling interest 1/1/24 Noncontrolling interest 12/31/24 Retained earnings 12/31/24 Total liabilities and equities $ 1,540,653 $ 599,700 (426,049) (300,000) (169,100) (100,000) $ 2,140,353 X (595,149) (400,000) x (814,604) (330,600) 1,145,204 X $ (1,540,653) $ (599,700) $ 193,564 $ 0 $ 2,815,346 x 101 APR 8 wwwww2 A ☑ P W

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2023, Pulaski, Incorporated, acquired a 60 percent interest in the common stock of Sheridan, Incorporated, for $384,600. Sheridan's book value on that date consisted of common stock of $100,000 and retained earnings of $227,300. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $256,400. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $78,400 and also had unpatented technology (15-year estimated remaining life) undervalued by $54,300. Any remaining excess acquisition-date fair value was assigned to an indefinite-lived trade name. Since acquisition, Pulaski has applied the equity method to its Investment in Sheridan account. At year-end, there are no intra-entity payables or receivables.

Intra-entity inventory sales between the two companies have been made as follows:

Year Cost to Pulaski Transfer Price to Sheridan Ending Balance (at transfer price)
2023 $ 127,200 $ 159,000 $ 53,000
2024 112,500 150,000 37,500

The individual financial statements for these two companies as of December 31, 2024, and the year then ended follow:

Items Pulaski, Incorporated Sheridan, Incorporated
Sales $ (732,000) $ (367,000)
Cost of goods sold 481,100 224,200
Operating expenses 197,185 76,400
Equity in earnings in Sheridan (34,189) 0
Net income $ (87,904) $ (66,400)
Retained earnings, 1/1/24 $ (774,600) $ (282,800)
Net income (87,904) (66,400)
Dividends declared 47,900 18,600
Retained earnings, 12/31/24 $ (814,604) $ (330,600)
Cash and receivables $ 277,400 $ 150,500
Inventory 260,500 131,200
Investment in Sheridan 423,453 0
Buildings (net) 338,000 205,300
Equipment (net) 241,300 89,100
Patents (net) 0 23,600
Total assets $ 1,540,653 $ 599,700
Liabilities $ (426,049) $ (169,100)
Common stock (300,000) (100,000)
Retained earnings, 12/31/24 (814,604) (330,600)
Total liabilities and equities $ (1,540,653) $ (599,700)

Note: Parentheses indicate a credit balance.

Finder File Edit
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A
Screenshot 2024-04-08 at 1...
@
୪
.0
Mon Apr 8 1:35 AM
Screenshot 2024-04-08...
Sales
S
(732,000) $ (367,000) $
150,000
$
Cost of goods sold
481,100
224,200
9,375
949,000
714,675 x
Operating expenses
197,185
76,400
76,597 X
Required A Required B
Show how Pulaski determined the $423,453 Investment in Sheridan account balance. Assume that Pulaski defers 100 pc
of downstream intra-entity profits against its share of Sheridan's income.
Note: Amounts to be deducted should be indicated with a minus sign.
Consideration transferred
Equity in earnings of Sheridan
(34,189)
0
34,189
Separate company net income
Consolidated net income
(87,904)
(66,400)
To noncontrolling interest
To Pulaski, Incorporated
Retained earnings 1/1/24
$ 384,600
Net income
(774,600)
(87,904)
(282,800)
(66,400)
$
2023 ending inventory profit deferral
350,411
Dividends declared
47,900
18,600
Excess fair value amortization
313,700 X
Retained earnings 12/31/24
$
(814,604) $
(330,600)
Increase in Sheridan's retained earnings 1/1/23 to 1/1/24
28,900 × 693,011
Pulaski's equity in earnings of Stinson for 2024
Cash and receivables
Inventory
$
277,400 $
150,500
260,500
131,200
Sheridan 2024 dividends declared to Pulaski
Investment account balance 12/31/24
$
1,077,611
Investment in Sheridan
Buildings (net)
423,453
0
(1,057,400) ☑
(154,304) X
66,500 X
$ (11,455,204) ×
$
427,900
391,700 X
423,453 X
338,000
205,300
543,300
241,300
89,100
330,400
0
23,600
23,600
000
Equipment (net)
Patents (net)
Required A
Required B >
Unpatented technology
Trade name
Total assets
Liabilities
Common stock
Noncontrolling interest 1/1/24
Noncontrolling interest 12/31/24
Retained earnings 12/31/24
Total liabilities and equities
$ 1,540,653
$
599,700
(426,049)
(300,000)
(169,100)
(100,000)
$
2,140,353 X
(595,149)
(400,000) x
(814,604)
(330,600)
1,145,204 X
$ (1,540,653) $ (599,700) $
193,564
$
0
$
2,815,346 x
101
APR
8
wwwww2
A
☑
P
W
Transcribed Image Text:Finder File Edit View Go Window Help A Screenshot 2024-04-08 at 1... @ ୪ .0 Mon Apr 8 1:35 AM Screenshot 2024-04-08... Sales S (732,000) $ (367,000) $ 150,000 $ Cost of goods sold 481,100 224,200 9,375 949,000 714,675 x Operating expenses 197,185 76,400 76,597 X Required A Required B Show how Pulaski determined the $423,453 Investment in Sheridan account balance. Assume that Pulaski defers 100 pc of downstream intra-entity profits against its share of Sheridan's income. Note: Amounts to be deducted should be indicated with a minus sign. Consideration transferred Equity in earnings of Sheridan (34,189) 0 34,189 Separate company net income Consolidated net income (87,904) (66,400) To noncontrolling interest To Pulaski, Incorporated Retained earnings 1/1/24 $ 384,600 Net income (774,600) (87,904) (282,800) (66,400) $ 2023 ending inventory profit deferral 350,411 Dividends declared 47,900 18,600 Excess fair value amortization 313,700 X Retained earnings 12/31/24 $ (814,604) $ (330,600) Increase in Sheridan's retained earnings 1/1/23 to 1/1/24 28,900 × 693,011 Pulaski's equity in earnings of Stinson for 2024 Cash and receivables Inventory $ 277,400 $ 150,500 260,500 131,200 Sheridan 2024 dividends declared to Pulaski Investment account balance 12/31/24 $ 1,077,611 Investment in Sheridan Buildings (net) 423,453 0 (1,057,400) ☑ (154,304) X 66,500 X $ (11,455,204) × $ 427,900 391,700 X 423,453 X 338,000 205,300 543,300 241,300 89,100 330,400 0 23,600 23,600 000 Equipment (net) Patents (net) Required A Required B > Unpatented technology Trade name Total assets Liabilities Common stock Noncontrolling interest 1/1/24 Noncontrolling interest 12/31/24 Retained earnings 12/31/24 Total liabilities and equities $ 1,540,653 $ 599,700 (426,049) (300,000) (169,100) (100,000) $ 2,140,353 X (595,149) (400,000) x (814,604) (330,600) 1,145,204 X $ (1,540,653) $ (599,700) $ 193,564 $ 0 $ 2,815,346 x 101 APR 8 wwwww2 A ☑ P W
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