Advanced Accounting (Looseleaf)
Advanced Accounting (Looseleaf)
12th Edition
ISBN: 9780077632595
Author: Hoyle
Publisher: MCG
Question
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Chapter 5, Problem 20P

a.

To determine

Determine balances for the following items that would appear on consolidated financial statements for 2015:

  • Cost of Goods Sold
  • Inventory
  • Net Income Attributable to Non-controlling Interest

a.

Expert Solution
Check Mark

Explanation of Solution

Computation of the consolidated balance of cost of goods sold:

ParticularsAmount
Balance of Company P $             410,000
Add: Balance of Cost of goods sold of Company S $             317,000
Less: Intra-entity transfer $            (134,000)
Less: Defer unrealized gross profit of 2014$            (19,500)
Add: Defer unrealized gross profit of 2015$           24,750
Consolidated balance of cost of goods sold $           598,250

Table: (1)

Thus, the consolidated balance of cost of goods sold in 2015 is $598,250.

Computation of the consolidated total for inventory at December 31:

ParticularsAmount
Balance of Company P $             370,000
Add: Balance of inventory of Company S $             144,000
Add: Defer unrealized gross profit of 2015$            (24,750)
Consolidated balance of inventory $           489,250

Table: (2)

Thus, the consolidated total for inventory at December 31 is $489,250.

Computation of Net Income Attributable to Non-controlling Interest:

ParticularsAmount
Sales $       600,000
Less: Cost of goods sold $     (317,000)
Less: Operating expenses $     (129,000)
Net income $       154,000
Percent of ownership of non-controlling interest20%
Net income attributable to non-controlling interest $         30,800

Table: (3)

Working note:

Computation of unrealized gross profit:

ParticularsAmount
Intra-entity gross profit percentage (60%1.60)37.5%
Inventory unsold at year end$ 66,000
Unrealized gross profit of 2015 $   24,750

Table: (4)

b.

To determine

Determine balances for the following items that would appear on consolidated financial statements for 2015:

  • Cost of Goods Sold
  • Inventory
  • Net Income Attributable to Non-controlling Interest

b.

Expert Solution
Check Mark

Explanation of Solution

Computation of the consolidated balance of cost of goods sold:

ParticularsAmount
Balance of Company P $             410,000
Add: Balance of Cost of goods sold of Company S $             317,000
Less: Intra-entity transfer $            (104,000)
Less: Defer unrealized gross profit of 2014$            (16,875)
Add: Defer unrealized gross profit of 2015$           22,125
Consolidated balance of cost of goods sold $           628,250

Table: (5)

Thus, the consolidated balance of cost of goods sold in 2015 is $628,250.

Computation of the consolidated total for inventory at December 31:

ParticularsAmount
Balance of Company P $             370,000
Add: Balance of inventory of Company S $             144,000
Add: Defer unrealized gross profit of 2015$            (22,125)
Consolidated balance of inventory $           491,875

Table: (6)

Thus, the consolidated total for inventory at December 31 is $491,875.

Computation of Net Income Attributable to Non-controlling Interest:

ParticularsAmount
Sales $       600,000
Less: Cost of goods sold $     (317,000)
Less: Operating expenses $     (129,000)
Net income $       154,000
Add: Unrealized gross profit of 2014 $         16,875
Less: Unrealized gross profit of 2015 $       (22,125)
Income to subsidiary to be consolidated $       148,750
Percent of ownership of non-controlling interest20%
Net income attributable to non-controlling interest $         29,750

Table: (7)

Working note:

Computation of unrealized gross profit:

ParticularsAmount
Intra-entity gross profit percentage (60%1.60)37.5%
Inventory unsold at year end$ 59,000
Unrealized gross profit of 2015 $   22,125

Table: (8)

c.

To determine

Determine balances for the following items that would appear on consolidated financial statements for 2015:

  • Buildings (net)
  • Operating expenses
  • Net Income Attributable to Non-controlling Interest

c.

Expert Solution
Check Mark

Explanation of Solution

Computation of the consolidated balance of building:

ParticularsAmount
Balance of Company P $             382,000
Add: Balance of building of Company S $             181,000
Less: Intra-entity transfer $            (54,000)
Add: Excess depreciation in 2014$            (10,800)
Add: Excess depreciation in 2015$           10,800
Consolidated balance of building $           530,600

Table: (9)

Thus, the consolidated balance of building in 2015 is $530,600.

Computation of the consolidated total for operating expenses at December 31:

ParticularsAmount
Balance of Company P $             174,000
Add: Balance of inventory of Company S $             129,000
Add: Excess depreciation$            (10,800)
Consolidated balance of operating expenses $           292,200

Table: (10)

Thus, the consolidated total for operating expenses at December 31 is $292,200.

Computation of Net Income Attributable to Non-controlling Interest:

ParticularsAmount
Sales $       600,000
Less: Cost of goods sold $     (317,000)
Less: Operating expenses $     (129,000)
Net income $       154,000
Percent of ownership of non-controlling interest20%
Net income attributable to non-controlling interest $         30,800

Table: (11)

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