For the consolidated financial statements for 20X1, determine the balances that would appear for the following accounts. (1) Cost of Goods Sold (2) Inventory (3) Noncontrolling Interest in Subsidiary's Net Income
(TCO E) Several years ago, Polar Inc. acquired an 80% interest in Icecap Co. The book values of Icecap's asset and liability accounts at that time were considered to be equal to their fair values. Polar's acquisition value corresponded to the underlying book value of Icecap so that no allocations or
The following selected account balances were from the individual financial records of these two companies as of December 31, 20X1.
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Polar Inc.
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Icecap Co.
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Sales
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$896,000
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$504,000
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Cost of goods sold
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406,000
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276,000
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Operating expenses
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210,000
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147,000
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1,036,000
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252,000
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Inventory
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484,000
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154,000
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Buildings (net)
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501,000
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220,000
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Investment income
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Not given
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Assume that Polar sold inventory to Icecap at a markup equal to 25% of cost. Intra-entity transfers were $130,000 in 20X0 and $165,000 in 20X1. Of this inventory, $39,000 of the 20X0 transfers were retained and then sold by Icecap in 20X1, while $55,000 of the 20X1 transfers were held until 20X2.
Required:
For the consolidated financial statements for 20X1, determine the balances that would appear for the following accounts.
(1) Cost of Goods Sold
(2) Inventory
(3) Noncontrolling Interest in Subsidiary's Net Income
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