Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2019, in exchange for $342,000 in cash. The subsidiary's stockholders' equity accounts totaled $326,000, and the noncontrolling interest had a fair value of $38,000 on that day. However, a building (with a nine-year remaining life) in Brey's accounting records was undervalued by $18,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (six-year remaining life). Brey reported net income from its own operations of $64,000 in 2019 and $80,000 in 2020. Brey declared dividends of $19,000 in 2019 and $23,000 in 2020. Brey sells inventory to Pitino as follows: Year Cost to Brey Transfer Price to Pitino Inventory Remaining at Year-End (at transfer price) 2019 $ 69,000 $ 115,000 $ 25,000 2020 81,000 135,000 37,500 2021 92,800 160,000 50,000 At December 31, 2021, Pitino owes Brey $16,000 for inventory acquired during the period. The following separate account balances are for these two companies for December 31, 2021, and the year then ended. Note: Parentheses indicate a credit balance. Pitino Brey Sales revenues $ (862,000 ) $ (366,000 ) Cost of goods sold 515,000 209,000 Expenses 185,400 67,000 Equity in earnings of Brey (68,400 ) 0 Net income $ (230,000 ) $ (90,000 ) Retained earnings, 1/1/21 $ (488,000 ) $ (278,000 ) Net income (above) (230,000 ) (90,000 ) Dividends declared 136,000 27,000 Retained earnings, 12/31/21 $ (582,000 ) $ (341,000 ) Cash and receivables $ 146,000 $ 98,000 Inventory 255,000 136,000 Investment in Brey 450,000 0 Land, buildings, and equipment (net) 964,000 328,000 Total assets $ 1,815,000 $ 562,000 Liabilities $ (718,000 ) $ (71,000 ) Common stock (515,000 ) (150,000 ) Retained earnings, 12/31/21 (582,000 ) (341,000 ) Total liabilities and equities $ (1,815,000 ) $ (562,000 ) What intra-entity gross profit in inventory existed as of December 31, 2021? What amounts make up the $68,400 Equity Earnings of Brey account balance for 2021? What is the net income attributable to the noncontrolling interest for 2021?
Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2019, in exchange for $342,000 in cash. The subsidiary's stockholders' equity accounts totaled $326,000, and the noncontrolling interest had a fair value of $38,000 on that day. However, a building (with a nine-year remaining life) in Brey's accounting records was undervalued by $18,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (six-year remaining life). Brey reported net income from its own operations of $64,000 in 2019 and $80,000 in 2020. Brey declared dividends of $19,000 in 2019 and $23,000 in 2020. Brey sells inventory to Pitino as follows: Year Cost to Brey Transfer Price to Pitino Inventory Remaining at Year-End (at transfer price) 2019 $ 69,000 $ 115,000 $ 25,000 2020 81,000 135,000 37,500 2021 92,800 160,000 50,000 At December 31, 2021, Pitino owes Brey $16,000 for inventory acquired during the period. The following separate account balances are for these two companies for December 31, 2021, and the year then ended. Note: Parentheses indicate a credit balance. Pitino Brey Sales revenues $ (862,000 ) $ (366,000 ) Cost of goods sold 515,000 209,000 Expenses 185,400 67,000 Equity in earnings of Brey (68,400 ) 0 Net income $ (230,000 ) $ (90,000 ) Retained earnings, 1/1/21 $ (488,000 ) $ (278,000 ) Net income (above) (230,000 ) (90,000 ) Dividends declared 136,000 27,000 Retained earnings, 12/31/21 $ (582,000 ) $ (341,000 ) Cash and receivables $ 146,000 $ 98,000 Inventory 255,000 136,000 Investment in Brey 450,000 0 Land, buildings, and equipment (net) 964,000 328,000 Total assets $ 1,815,000 $ 562,000 Liabilities $ (718,000 ) $ (71,000 ) Common stock (515,000 ) (150,000 ) Retained earnings, 12/31/21 (582,000 ) (341,000 ) Total liabilities and equities $ (1,815,000 ) $ (562,000 ) What intra-entity gross profit in inventory existed as of December 31, 2021? What amounts make up the $68,400 Equity Earnings of Brey account balance for 2021? What is the net income attributable to the noncontrolling interest for 2021?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 8MC
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Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2019, in exchange for $342,000 in cash. The subsidiary's
Brey reported net income from its own operations of $64,000 in 2019 and $80,000 in 2020. Brey declared dividends of $19,000 in 2019 and $23,000 in 2020.
Brey sells inventory to Pitino as follows:
| Year | Cost to Brey | Transfer Price to Pitino | Inventory Remaining at Year-End (at transfer price) | ||||||
| 2019 | $ | 69,000 | $ | 115,000 | $ | 25,000 | |||
| 2020 | 81,000 | 135,000 | 37,500 | ||||||
| 2021 | 92,800 | 160,000 | 50,000 | ||||||
At December 31, 2021, Pitino owes Brey $16,000 for inventory acquired during the period.
The following separate account balances are for these two companies for December 31, 2021, and the year then ended.
Note: Parentheses indicate a credit balance.
| Pitino | Brey | ||||||
| Sales revenues | $ | (862,000 | ) | $ | (366,000 | ) | |
| Cost of goods sold | 515,000 | 209,000 | |||||
| Expenses | 185,400 | 67,000 | |||||
| Equity in earnings of Brey | (68,400 | ) | 0 | ||||
| Net income | $ | (230,000 | ) | $ | (90,000 | ) | |
| $ | (488,000 | ) | $ | (278,000 | ) | ||
| Net income (above) | (230,000 | ) | (90,000 | ) | |||
| Dividends declared | 136,000 | 27,000 | |||||
| Retained earnings, 12/31/21 | $ | (582,000 | ) | $ | (341,000 | ) | |
| Cash and receivables | $ | 146,000 | $ | 98,000 | |||
| Inventory | 255,000 | 136,000 | |||||
| Investment in Brey | 450,000 | 0 | |||||
| Land, buildings, and equipment (net) | 964,000 | 328,000 | |||||
| Total assets | $ | 1,815,000 | $ | 562,000 | |||
| Liabilities | $ | (718,000 | ) | $ | (71,000 | ) | |
| Common stock | (515,000 | ) | (150,000 | ) | |||
| Retained earnings, 12/31/21 | (582,000 | ) | (341,000 | ) | |||
| Total liabilities and equities | $ | (1,815,000 | ) | $ | (562,000 | ) | |
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What intra-entity gross profit in inventory existed as of December 31, 2021?
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What amounts make up the $68,400 Equity Earnings of Brey account balance for 2021?
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What is the net income attributable to the noncontrolling interest for 2021?
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