Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2019, in exchange for $351,000 in cash. The subsidiary's stockholders' equity accounts totaled $335,000, and the noncontrolling interest had a fair value of $39,000 on that day. However, a building (with a ten-year remaining life) in Brey's accounting records was undervalued by $15,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (four-year remaining life). Brey reported net income from its own operations of $65,000 in 2019 and $81,000 in 2020. Brey declared dividends of $19,500 in 2019 and $23,500 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 $ 70,000 $ 120,000 $ 26,000 2020 77,000 140,000 38,000 2021 99,000 165,000 40,000 At December 31, 2021, Pitino owes Brey $17,000 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 $ (864,000 ) $ (371,000 ) Cost of goods sold 516,000 210,000 Expenses 185,500 60,000 Equity in earnings of Brey (81,540 ) 0 Net income $ (244,040 ) $ (101,000 ) Retained earnings, 1/1/21 $ (490,000 ) $ (280,000 ) Net income (above) (244,040 ) (101,000 ) Dividends declared 130,000 20,000 Retained earnings, 12/31/21 $ (604,040 ) $ (361,000 ) Cash and receivables $ 147,000 $ 99,000 Inventory 260,000 141,000 Investment in Brey 471,150 0 Land, buildings, and equipment (net) 965,000 329,000 Total assets $ 1,843,150 $ 569,000 Liabilities $ (719,110 ) $ (50,000 ) Common stock (520,000 ) (158,000 ) Retained earnings, 12/31/21 (604,040 ) (361,000 ) Total liabilities and equity $ (1,843,150 ) $ (569,000 ) What was the annual amortization resulting from the acquisition-date fair-value allocations? Were the intra-entity transfers upstream or downstream? What intra-entity gross profit in inventory existed as of January 1, 2021? What intra-entity gross profit in inventory existed as of December 31, 2021? What amounts make up the $81,540 Equity Earnings of Brey account balance for 2021? What is the net income attributable to the noncontrolling interest for 2021? What amounts make up the $471,150 Investment in Brey account balance as of December 31, 2021? Prepare the 2021 worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances. Without preparing a worksheet or consolidation entries, determine the consolidation balances for these two companies.

Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2019, in exchange for $351,000 in cash. The subsidiary's stockholders' equity accounts totaled $335,000, and the noncontrolling interest had a fair value of $39,000 on that day. However, a building (with a ten-year remaining life) in Brey's accounting records was undervalued by $15,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (four-year remaining life). Brey reported net income from its own operations of $65,000 in 2019 and $81,000 in 2020. Brey declared dividends of $19,500 in 2019 and $23,500 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 $ 70,000 $ 120,000 $ 26,000 2020 77,000 140,000 38,000 2021 99,000 165,000 40,000 At December 31, 2021, Pitino owes Brey $17,000 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 $ (864,000 ) $ (371,000 ) Cost of goods sold 516,000 210,000 Expenses 185,500 60,000 Equity in earnings of Brey (81,540 ) 0 Net income $ (244,040 ) $ (101,000 ) Retained earnings, 1/1/21 $ (490,000 ) $ (280,000 ) Net income (above) (244,040 ) (101,000 ) Dividends declared 130,000 20,000 Retained earnings, 12/31/21 $ (604,040 ) $ (361,000 ) Cash and receivables $ 147,000 $ 99,000 Inventory 260,000 141,000 Investment in Brey 471,150 0 Land, buildings, and equipment (net) 965,000 329,000 Total assets $ 1,843,150 $ 569,000 Liabilities $ (719,110 ) $ (50,000 ) Common stock (520,000 ) (158,000 ) Retained earnings, 12/31/21 (604,040 ) (361,000 ) Total liabilities and equity $ (1,843,150 ) $ (569,000 ) What was the annual amortization resulting from the acquisition-date fair-value allocations? Were the intra-entity transfers upstream or downstream? What intra-entity gross profit in inventory existed as of January 1, 2021? What intra-entity gross profit in inventory existed as of December 31, 2021? What amounts make up the $81,540 Equity Earnings of Brey account balance for 2021? What is the net income attributable to the noncontrolling interest for 2021? What amounts make up the $471,150 Investment in Brey account balance as of December 31, 2021? Prepare the 2021 worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances. Without preparing a worksheet or consolidation entries, determine the consolidation balances for these two companies.

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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Related questions

Question

Brey reported net income from its own operations of $65,000 in 2019 and $81,000 in 2020. Brey declared dividends of $19,500 in 2019 and $23,500 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	$	70,000		$	120,000	$	26,000
2020		77,000			140,000		38,000
2021		99,000			165,000		40,000

At December 31, 2021, Pitino owes Brey $17,000 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	$	(864,000	)	$	(371,000	)
Cost of goods sold		516,000			210,000
Expenses		185,500			60,000
Equity in earnings of Brey		(81,540	)		0
Net income	$	(244,040	)	$	(101,000	)
Retained earnings, 1/1/21	$	(490,000	)	$	(280,000	)
Net income (above)		(244,040	)		(101,000	)
Dividends declared		130,000			20,000
Retained earnings, 12/31/21	$	(604,040	)	$	(361,000	)
Cash and receivables	$	147,000		$	99,000
Inventory		260,000			141,000
Investment in Brey		471,150			0
Land, buildings, and equipment (net)		965,000			329,000
Total assets	$	1,843,150		$	569,000
Liabilities	$	(719,110	)	$	(50,000	)
Common stock		(520,000	)		(158,000	)
Retained earnings, 12/31/21		(604,040	)		(361,000	)
Total liabilities and equity	$	(1,843,150	)	$	(569,000	)

What was the annual amortization resulting from the acquisition-date fair-value allocations?
Were the intra-entity transfers upstream or downstream?
What intra-entity gross profit in inventory existed as of January 1, 2021?
What intra-entity gross profit in inventory existed as of December 31, 2021?
What amounts make up the $81,540 Equity Earnings of Brey account balance for 2021?
What is the net income attributable to the noncontrolling interest for 2021?
What amounts make up the $471,150 Investment in Brey account balance as of December 31, 2021?
Prepare the 2021 worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances.
Without preparing a worksheet or consolidation entries, determine the consolidation balances for these two companies.