Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 6, Problem 6.9.2P
Problem 6-9 (LO 3) Worksheet, consolidated
During 2017, Parson sells $60,000 worth of merchandise to Solar. Solar holds $15,000 of this merchandise in its ending inventory. Solar owes $10,000 to Parson as a result of these intercompany sales. Parson has a gross profit rate of 40%.
On January 1, 2015, Parson sells equipment having a net book value of $50,000 to Solar for $80,000. The equipment has a 5-year useful life and is
On January 1, 2017, Solar sells equipment to Parson at a profit of $25,000. The equipment has a 5-year useful life and is depreciated using the straight-line method.
Neither company has provided for income tax. The companies qualify as an affiliated group and, thus, will file a consolidated tax return based on a 40% corporate tax rate. The original purchase is not a nontaxable exchange.
On December 31, 2017, Parson and Solar have the following
Required
Prepare a consolidated worksheet for the year ended December 31, 2017. Include a provision for income tax and income distribution schedules.
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E 5-6 Upstream and downstream sales
Pam Corporation owns 70 percent of Sun Company’s common stock, acquired January 1, 2017. Patents from the investment are being amortized at a rate of $20,000 per year. Sun regularly sells merchandise to Pam at 150 percent of Sun’s cost. Pam’s December 31, 2017, and 2018 inventories include goods purchased intercompany of $112,500 and $33,000, respectively. The separate incomes (do not include investment income) of Pam and Sun for 2018 are summarized as follows:
Pam
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$800,000
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(500,000)
Other expenses
(400,000)
(100,000)
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$ 200,000
$200,000
Total consolidated income should be allocated to controlling and noncontrolling interest shares in the amounts of:
$344,550 and $61,950, respectively
$358,550 and $60,000, respectively
$346,500 and $60,000, respectively…
E 3-7 Prepare consolidated income statements with and without fair value/book value differentials
Summary income statement information for Pam Corporation and its 70 percent–owned subsidiary, Sun, for the year 2017 is as follows (in thousands):
Pam
Sun
Sales
$4,000
$ 1,600
Income from Sun
196
—
Cost of sales
(2,400)
(800)
Depreciation expense
(200)
(160)
Other expenses
(796)
(360)
Net income
$ 800
$ 280
Required
Assume that Pam acquired its 70 percent interest in Sun at book value on January 1, 2016, when the fair value of Sun’s assets and liabilities were equal to recorded book values. There were no intercompany transactions during 2016 and 2017. Prepare a consolidated income statement for Pam Corporation and Subsidiary for 2017.
Assume that Pam acquired its 70 percent interest in Sun on January 1, 2016, for $560,000. $120,000 was allocated to a reduction of overvalued equipment with a…
Problems 7 and 8 relate to the following:
On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc., for $540,000 cash. The acquisition-date fair value of the noncontrolling interest was $60,000. At January 1, 2016, Star’s net assets had a total carrying amount of $420,000. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $80,000. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $70,000 in 2016 and $80,000 in 2017. Each year since the acquisition, Star has declared a $20,000 dividend. At January 1, 2018, Pride’s retained earnings show a $250,000 balance.
Selected account balances for the two companies from their separate operations were as follows
Assuming that Pride, in its internal records, accounts for its investment in Star using the equity method, what amount of…
Chapter 6 Solutions
Advanced Accounting
Ch. 6 - Prob. 1UTICh. 6 - Prob. 2UTICh. 6 - Prob. 3UTICh. 6 - Prob. 4UTICh. 6 - Prob. 5UTICh. 6 - Prob. 6UTICh. 6 - Prob. 7UTICh. 6 - Prob. 1ECh. 6 - Prob. 2ECh. 6 - Prob. 3E
Ch. 6 - Prob. 4ECh. 6 - Problem 6-1 (LO 1) Cash flow, year subsequent to...Ch. 6 - Problem 6-4 (L02) Consolidated EPS. On January 1,...Ch. 6 - Prob. 6.8.1PCh. 6 - Prob. 6.8.2PCh. 6 - Problem 6-9 (LO 3) Worksheet, consolidated...Ch. 6 - Problem 6-9 (LO 3) Worksheet, consolidated...Ch. 6 - Prob. 6.11.1PCh. 6 - Prob. 6.11.2PCh. 6 - Problem 6-12 (LO 4) Worksheet, separate tax,...Ch. 6 - Prob. 6.12.2P
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