Condensed income statements for Pon and its 80 percent-owned subsidiary, Star, appear below.Condensed Income StatementsPonStarSales$9,000,000$4,000,000Equity in net income of Star439,000--Cost of goods sold(6,000,000)(2,500,000)Other expenses(2,000,000)(600,000)Net income$1,439,000$900,000Intercompany sales are $1,500,000. Unconfirmed intercompany profit in Pon’s beginning inventory is $100,000, and unconfirmed intercompany profit in Pon’s ending inventory is $120,000. Unconfirmed intercompany profit in Star’s beginning inventory is $90,000, and unconfirmed intercompany profit in Star’s ending inventory is $50,000. At the date of combination four years ago, previously unrecorded identifiable intangibles (8-year life, straight-line) of $800,000 were recognized. Because the acquisition cost included a control premium, total goodwill recognized at the date of acquisition is shared with the noncontrolling interest in a 90:10 ratio. This year’s goodwill impairment loss is $250,000. Required a. Prepare a schedule to compute Pon’s equity in net income and the noncontrolling interest in net income. Use negative signs with answers that reduce net income amounts.Enter answers using all zeros (do not abbreviate to millions or thousands). TotalEquityin NINoncontrollingInterest in NIStar’s reported net income Answer Answer Answer Amortization of identifiable intangibles Answer Answer Answer Goodwill impairment loss Answer Answer Answer Confirmed profit in BI - upstream Answer Answer Answer Confirmed profit in BI - downstream Answer Answer Answer Unconfirmed profit in EI - upstream Answer Answer Answer Unconfirmed profit in EI - downstream Answer Answer Answer Answer Answer Answer b. Prepare a condensed consolidated income statement for Pon and Star. Do not use negative signs with any of your answers below.Enter answers using all zeros (do not abbreviate to millions or thousands). Pon and StarConsolidated Income StatementSales Answer Cost of goods sold Answer Other expenses Answer Consolidated net income Answer Less consolidated NI attributed to NCI Answer Consolidated net income attributed to controlling interest Answer PreviousSave AnswersNext

Consolidated Net Income (Loss) refers to the net income (or loss) of the Company and its…

Answered: Condensed income statements for Pon and…

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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Condensed income statements for Pon and its 80 percent-owned subsidiary, Star, appear below.

Condensed Income Statements	Pon	Star
Sales	$9,000,000	$4,000,000
Equity in net income of Star	439,000	--
Cost of goods sold	(6,000,000)	(2,500,000)
Other expenses	(2,000,000)	(600,000)
Net income	$1,439,000	$900,000

Intercompany sales are $1,500,000. Unconfirmed intercompany profit in Pon’s beginning inventory is $100,000, and unconfirmed intercompany profit in Pon’s ending inventory is $120,000. Unconfirmed intercompany profit in Star’s beginning inventory is $90,000, and unconfirmed intercompany profit in Star’s ending inventory is $50,000. At the date of combination four years ago, previously unrecorded identifiable intangibles (8-year life, straight-line) of $800,000 were recognized. Because the acquisition cost included a control premium, total goodwill recognized at the date of acquisition is shared with the noncontrolling interest in a 90:10 ratio. This year’s goodwill impairment loss is $250,000.

Required

a. Prepare a schedule to compute Pon’s equity in net income and the noncontrolling interest in net income.

Use negative signs with answers that reduce net income amounts.
Enter answers using all zeros (do not abbreviate to millions or thousands).

	Total	Equity in NI	Noncontrolling Interest in NI
Star’s reported net income	Answer	Answer	Answer
Amortization of identifiable intangibles	Answer	Answer	Answer
Goodwill impairment loss	Answer	Answer	Answer
Confirmed profit in BI - upstream	Answer	Answer	Answer
Confirmed profit in BI - downstream	Answer	Answer	Answer
Unconfirmed profit in EI - upstream	Answer	Answer	Answer
Unconfirmed profit in EI - downstream	Answer	Answer	Answer
	Answer	Answer	Answer

b. Prepare a condensed consolidated income statement for Pon and Star.

Do not use negative signs with any of your answers below.
Enter answers using all zeros (do not abbreviate to millions or thousands).

Pon and Star Consolidated Income Statement
Sales		Answer
Cost of goods sold		Answer
Other expenses		Answer
Consolidated net income		Answer
Less consolidated NI attributed to NCI		Answer
Consolidated net income attributed to controlling interest		Answer

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