Question 1

Yukon Co. acquired 75% percent of the voting common stock of Ontario Corp. on January 1, 2011. During the year, Yukon made sales of inventory to Ontario. The inventory cost Yukon $260,000 and was sold to Ontario for $390,000. Ontario still had $60,000 of the goods in its inventory at the end of the year. The amount of unrealized intra-entity profit that should be eliminated in the consolidation process at the end of 2011 is

Accepted Answer

B

Question 2

Gentry Inc. acquired 100% of Gaspard Farms on January 5, 2010. During 2010, Gentry sold Gaspard Farms for $625,000 goods which had cost $425,000. Gaspard Farms still owned 12% of the goods at the end of the year. In 2011, Gentry sold goods with a cost of $800,000 to Gaspard Farms for $1,000,000, and Gaspard Farms still owned 10% of the goods at year-end. For 2011, cost of goods sold was $5,400,000 for Gentry and $1,200,000 for Gaspard Farms. What was consolidated cost of goods sold for 2011?

Accepted Answer

To calculate consolidated cost of goods sold, we need to add the cost of goods sold of both Gentry and Gaspard Farms, and adjust for intercompany sales and inventory still on hand.

For Gentry:

Cost of goods sold = $5,400,000

Adjustment for sales to Gaspard Farms:

- Sales to Gaspard Farms = $1,000,000
- Cost of goods sold for those sales = $800,000
- Intercompany profit = $200,000 (sales - cost of goods sold)
- Intercompany profit is eliminated in consolidation, so we need to subtract it from Gentry's cost of goods sold: 
$5,400,000 - $200,000 = $5,200,000

For Gaspard Farms:

Cost of goods sold = $1,200,000

Adjustment for inventory still on hand:

- Gaspard Farms still owned 10% of goods sold by Gentry, which had a cost of $800,000
- 10% of $800,000 = $80,000
- Since these goods have not yet been sold by Gaspard Farms, they are still in inventory and need to be added to Gaspard Farms' cost of goods sold: 
$1,200,000 + $80,000 = $1,280,000

Consolidated cost of goods sold = $5,200,000 + $1,280,000 = $6,480,000

However, we need to be careful because the question asks for the consolidated cost of goods sold, including the intercompany sales and inventory adjustments. So we need to add back in the intercompany profit and subtract the 10% of goods sold by Gaspard Farms that are still on hand:

Consolidated cost of goods sold = $6,480,000 + $200,000 - $80,000 = $6,600,000.

Therefore, the correct answer is D.

Question 3

X-Beams Inc. owned 70% of the voting common stock of Kent Corp. During 2011, Kent made several sales of inventory to X-Beams. The total selling price was $180,000 and the cost was $100,000. At the end of the year, 20% of the goods were still in X-Beams' inventory. Kent's reported net income was $300,000. What was the non-controlling interest in Kent's net income?

Accepted Answer

First, we need to find the profit on the sale of inventory to X-Beams: 
Revenue - Cost = Profit 
$180,000 - $100,000 = $80,000 
Since 20% of the goods are still in X-Beams' inventory, we need to adjust Kent's reported cost of goods sold by 20% of the original cost ($100,000) or $20,000. 
Adjusted Cost of Goods Sold = $100,000 - $20,000 = $80,000 
Adjusted Net Income = Reported Net Income + (Non-controlling Interest percentage x Adjusted Profit) - (Non-controlling Interest percentage x Adjusted Cost of Goods Sold) 
Non-controlling Interest percentage = 30% (100% - 70%) 
Adjusted Net Income = $300,000 + (30% x $80,000) - (30% x $80,000) = $300,000 + $24,000 - $24,000 = $300,000 
To find the non-controlling interest in Kent's net income, we need to subtract X-Beams' share of net income: 
Non-controlling Interest = Adjusted Net Income x Non-controlling Interest percentage 
Non-controlling Interest = $300,000 x 30% = $85,200 
Therefore, the non-controlling interest in Kent's net income is $85,200 (option B).

Question 4

Bauerly Co. owned 70% of the voting common stock of Devin Co. During 2010, Devin made frequent sales of inventory to Bauerly. There were unrealized gains of $40,000 in the beginning inventory and $25,000 of unrealized gains at the end of the year. Devin reported net income of $137,000 for 2010. Bauerly decided to use the equity method to account for the investment. What is the non-controlling interest's share of Devin's net income for 2010?

Accepted Answer

The answer of Bauerly Co. owned 70% of the voting...

Question 5

Gibson Corp. owned a 90% interest in Sparis Co. Sparis frequently made sales of inventory to Gibson. The sales, which include a markup over cost of 25%, were $420,000 in 2010 and $500,000 in 2011. At the end of each year, Gibson still owned 30% of the goods. Net income for Sparis was $912,000 during 2011. What was the non-controlling interest's share of Sparis' net income for 2011?

Accepted Answer

First, we need to calculate the total sales made by Sparis to Gibson, which is ($500,000 - 25%) = $375,000.
Then, we calculate the cost of goods sold for these sales, which is ($375,000 / 1.25) = $300,000.
At the end of 2011, the remaining inventory held by Gibson would be valued at ($300,000 x 30%) = $90,000.
Next, we need to calculate the net income attributable to the non-controlling interest in Sparis. This can be done by multiplying the total net income for Sparis by the non-controlling interest percentage, which is 10% (100% - 90%). 
Thus, the non-controlling interest's share of net income is ($912,000 x 10%) = $91,200.
However, we need to adjust this for the inventory held by Gibson at the end of the year. The non-controlling interest would have been entitled to 10% of the profit made on this inventory. 
The profit on the remaining inventory held by Gibson is ($90,000 x 25%) = $22,500.
Thus, the adjusted net income attributable to the non-controlling interest is ($91,200 - $22,500) = $68,700.
Finally, we need to add the share of net income attributable to the non-controlling interest to the portion of net income attributable to the parent company (Gibson) to get the total net income for Sparis for 2011 ($912,000 + $68,700 = $980,700).
Therefore, the non-controlling interest's share of Sparis' net income for 2011 is $68,700. Option C is the closest.

Question 6

Justings Co. owned 80% of Evana Corp. During 2011, Justings sold to Evana land with a book value of $48,000. The selling price was $70,000. In its accounting records, Justings should

Accepted Answer

The answer of Justings Co. owned 80% of Evana Corp....

Question 7

On November 8, 2011, Power Corp. sold land to Wood Co., its wholly owned subsidiary. The land cost $61,500 and was sold to Wood for $89,000. From the perspective of the combination, when is the gain on the sale of the land realized?

Accepted Answer

The answer of On November 8, 2011, Power Corp. sold...

Question 8

Clemente Co. owned all of the voting common stock of Snider Co. On January 2, 2010, Clemente sold equipment to Snider for $125,000. The equipment had cost Clemente $140,000. At the time of the sale, the balance in accumulated depreciation was $40,000. The equipment had a remaining useful life of five years and a $0 salvage value. Straight-line depreciation is used by both Clemente and Snider.
At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31, 2011?

Accepted Answer

The answer of Clemente Co. owned all of the voting...

Question 9

Edgar Co. acquired 60% of Stendall Co. on January 1, 2011. During 2011, Edgar made several sales of inventory to Stendall. The cost and selling price of the goods were $140,000 and $200,000, respectively. Stendall still owned one-fourth of the goods at the end of 2011. Consolidated cost of goods sold for 2011 was $2,140,000 because of a consolidating adjustment for intra-entity sales less the entire profit remaining in Stendall's ending inventory.
How would non-controlling interest in net income have differed if the transfers had been for the same amount and cost, but from Stendall to Edgar?

Accepted Answer

The answer of Edgar Co. acquired 60% of Stendall Co....

Question 10

On January 1, 2011, Race Corp. acquired 80% of the voting common stock of Gallow Inc. During the year, Race sold to Gallow for $450,000 goods which cost $330,000. Gallow still owned 15% of the goods at year-end. Gallow's reported net income was $204,000, and Race's net income was $806,000. Race decided to use the equity method to account for this investment. What was the non-controlling interest's share of consolidated net income?

Accepted Answer

The answer of On January 1, 2011, Race Corp. acquired...

Question 11

On January 1, 2011, Payton Co. sold equipment to its subsidiary, Starker Corp., for $115,000. The equipment had cost $125,000, and the balance in accumulated depreciation was $45,000. The equipment had an estimated remaining useful life of eight years and $0 salvage value. Both companies use straight-line depreciation. On their separate 2011 income statements, Payton and Starker reported depreciation expense of $84,000 and $60,000, respectively. The amount of depreciation expense on the consolidated income statement for 2011 would have been

Accepted Answer

The answer of On January 1, 2011, Payton Co. sold...

Question 12

Prince Corp. owned 80% of Kile Corp.'s common stock. During October 2011, Kile sold merchandise to Prince for $140,000. At December 31, 2011, 50% of this merchandise remained in Prince's inventory. For 2011, gross profit percentages were 30% of sales for Prince and 40% of sales for Kile. The amount of unrealized intra-entity profit in ending inventory at December 31, 2011 that should be eliminated in the consolidation process is

Accepted Answer

The answer of Prince Corp. owned 80% of Kile Corp.'s...

Question 13

Pot Co. holds 90% of the common stock of Skillet Co. During 2011, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000.
Included in the amounts for Pot's sales were Pot's sales of merchandise to Skillet for $140,000. There were no sales from Skillet to Pot. Intra-entity sales had the same markup as sales to outsiders. Skillet still had 40% of the intra-entity sales as inventory at the end of 2011. What are consolidated sales and cost of goods sold for 2011?

Accepted Answer

Consolidated sales = Pot's sales ($1,120,000) + Skillet's sales ($420,000 - $140,000 inter-company sales) = $1,400,000
Consolidated cost of goods sold = Pot's cost of goods sold ($840,000) + Skillet's cost of goods sold ($252,000 - $84,000 intra-entity cost of goods sold) = $966,000

Question 14

During 2010, Von Co. sold inventory to its wholly-owned subsidiary, Lord Co. The inventory cost $30,000 and was sold to Lord for $44,000. From the perspective of the combination, when is the $14,000 gain realized?

Accepted Answer

The answer of During 2010, Von Co. sold inventory to...

Question 15

Norek Corp. owned 70% of the voting common stock of Thelma Co. On January 2, 2010, Thelma sold a parcel of land to Norek. The land had a book value of $32,000 and was sold to Norek for $45,000. Thelma's reported net income for 2010 was $119,000. What is the non-controlling interest's share of Thelma's net income?

Accepted Answer

Since Norek owns 70% of Thelma, the non-controlling interest owns 30%. Therefore, the non-controlling interest's share of net income is:
$119,000 x 30% = $35,700
However, since Thelma sold a parcel of land to Norek, there is a gain on the sale that must be eliminated from Thelma's net income to determine the non-controlling interest's share. The gain on the sale is the difference between the sales price and the book value:
$45,000 - $32,000 = $13,000
The non-controlling interest's share of this gain is:
$13,000 x 30% = $3,900
Therefore, the non-controlling interest's share of Thelma's net income is:
$35,700 - $3,900 = $31,800.

Question 16

Edgar Co. acquired 60% of Stendall Co. on January 1, 2011. During 2011, Edgar made several sales of inventory to Stendall. The cost and selling price of the goods were $140,000 and $200,000, respectively. Stendall still owned one-fourth of the goods at the end of 2011. Consolidated cost of goods sold for 2011 was $2,140,000 because of a consolidating adjustment for intra-entity sales less the entire profit remaining in Stendall's ending inventory.
How would consolidated cost of goods sold have differed if the inventory transfers had been for the same amount and cost, but from Stendall to Edgar?

Accepted Answer

The consolidated cost of goods sold would remain $2,140,000 regardless of the direction of the inventory transfers because the adjustment for intra-entity sales eliminates the effect of these transactions on consolidated cost of goods sold.

Question 17

Chain Co. owned all of the voting common stock of Shannon Corp. The corporations' balance sheets dated December 31, 2010, include the following balances for land: for Chain--$416,000, and for Shannon--$256,000. On the original date of acquisition, the book value of Shannon's land was equal to its fair value. On April 4, 2011, Chain sold to Shannon a parcel of land with a book value of $65,000. The selling price was $83,000. There were no other transactions which affected the companies' land accounts during 2010. What is the consolidated balance for land on the 2011 balance sheet?

Accepted Answer

The answer of Chain Co. owned all of the voting...

Question 18

Pot Co. holds 90% of the common stock of Skillet Co. During 2011, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000.
Included in the amounts for Skillet's sales were Skillet's sales of merchandise to Pot for $140,000. There were no sales from Pot to Skillet. Intra-entity sales had the same markup as sales to outsiders. Pot still had 40% of the intra-entity sales as inventory at the end of 2011. What are consolidated sales and cost of goods sold for 2011?

Accepted Answer

The answer of Pot Co. holds 90% of the common...

Question 19

Clemente Co. owned all of the voting common stock of Snider Co. On January 2, 2010, Clemente sold equipment to Snider for $125,000. The equipment had cost Clemente $140,000. At the time of the sale, the balance in accumulated depreciation was $40,000. The equipment had a remaining useful life of five years and a $0 salvage value. Straight-line depreciation is used by both Clemente and Snider.
At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31, 2010?

Accepted Answer

The answer of Clemente Co. owned all of the voting...

Question 20

Webb Co. acquired 100% of Rand Inc. on January 5, 2011. During 2011, Webb sold goods to Rand for $2,400,000 that cost Webb $1,800,000. Rand still owned 40% of the goods at the end of the year. Cost of goods sold was $10,800,000 for Webb and $6,400,000 for Rand. What was consolidated cost of goods sold?

Accepted Answer

The answer of Webb Co. acquired 100% of Rand Inc....

Quiz 5: Consolidated Financial Statementsintra-Entity Asset Transactions

Justings Co. owned 80% of Evana Corp. During 2011, Justings sold to Evana land with a book value of $48,000. The selling price was $70,000. In its accounting records, Justings should

On November 8, 2011, Power Corp. sold land to Wood Co., its wholly owned subsidiary. The land cost $61,500 and was sold to Wood for $89,000. From the perspective of the combination, when is the gain on the sale of the land realized?

During 2010, Von Co. sold inventory to its wholly-owned subsidiary, Lord Co. The inventory cost $30,000 and was sold to Lord for $44,000. From the perspective of the combination, when is the $14,000 gain realized?