Chapter 5, Problem 26P

a.

To determine

Prepare worksheet entries to consolidate these two companies as of December 31, 2015.

Explanation of Solution

The worksheet entries to consolidate these two companies as of December 31, 2015:

Entry G
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Retained earnings of Company S		$       2,000
	Cost of goods sold			$      2,000
	(being opening unrealized gross profit eliminated)
Entry TA
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Equipment		$       4,000
	Investment in Company S		$       2,400
	Accumulated Depreciation			$      6,400
	(Being excess depreciation eliminated)
Entry S
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Common stock		$   120,000
	Retained earnings on 01/01/2015		$   258,000
	Investment in Company S			$  302,400
	Non controlling interest			$    75,600
	(being controlling and non-controlling interest recorded)
Entry A
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Contracts		$     54,000
	Buildings		$     16,000
	Investment in Company S			$    56,000
	Non controlling interest			$    14,000
	(being assets transferred to controlling and non-controlling interest)
Entry I
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Investment income		$     10,000
	Investment in Company S			$    10,000
	(being intra-entity net income recorded)
Entry E
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Depreciation expense		$       2,000
	Amortization expense		$       3,000
	Contracts			$      3,000
	Buildings			$      2,000
	(being amortization and depreciation recorded)
Entry TI
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Sales		$     20,000
	Cost of goods sold			$    20,000
	(being intra-entity sale eliminated)
Entry G
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Cost of goods sold		$       4,500
	Inventory			$      4,500
	(being unrealized gross profit eliminated)
Entry ED
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Accumulated Depreciation		$          600
	Depreciation expense			$         600
	(being excess depreciation eliminated)

Table: (1)

b.

To determine

Compute the net income attributable to the non-controlling interest for 2015.

Explanation of Solution

Computation of net income attributable to the non-controlling interest for 2015:

Particulars	Amount
Sales	$           130,000
Less: Cost of goods sold	$            (70,000)
Less: Operating expenses	$            (40,000)
Excess acquisition date fair value	$              (5,000)
Net income after adjustment	$             15,000
Add: Unrealized gross profit of 2014	$               2,000
Less: Unrealized gross profit of 2015	$              (4,500)
Income to subsidiary to be consolidated	$             12,500
Percent of ownership of non-controlling interest	20%
Net income attributable to non-controlling interest	$               2,500

Table: (2)