Parson Company acquired an 80 percent interest in Syber Company on January 1, 20
ID: 2408542 • Letter: P
Question
Parson Company acquired an 80 percent interest in Syber Company on January 1, 2017. Any portion of Syber's business fair value in excess of its corresponding book value was assigned to trademarks. This intangible asset has subsequently undergone annual amortization based on a 15-year life. Over the past two years, regular intra-entity inventory sales transpired between the two companies. No payment has yet been made on the latest transfer. All dividends are paid in the same period as declared.
The individual financial statements for the two companies as well as consolidated totals for 2018 follow:
ParsonCompany Syber
Company Consolidated
Totals Sales $ (990,000 ) $ (790,000 ) $ (1,622,000 ) Cost of goods sold 595,000 495,000 946,000 Operating expenses 138,000 157,000 298,000 Income of Syber (103,300 ) 0 0 Separate company net income $ (360,300 ) $ (138,000 ) Consolidated net income $ (378,000 ) Net income attributable to noncontrolling interest 17,700 Net income attributable to Parson Company $ (360,300 ) Retained earnings, 1/1/18 $ (640,100 ) $ (328,000 ) $ (640,100 ) Net income (above) (360,300 ) (138,000 ) (360,300 ) Dividends declared 68,000 49,000 68,000 Retained earnings, 12/31/18 $ (932,400 ) $ (417,000 ) $ (932,400 ) Cash and receivables $ 488,000 $ 99,000 $ 561,200 Inventory 209,000 198,000 388,000 Investment in Syber Company 446,400 0 0 Land, buildings, and equipment 418,000 317,000 735,000 Trademarks 0 0 32,500 Total assets $ 1,561,400 $ 614,000 $ 1,716,700 Liabilities $ (365,000 ) $ (119,000 ) $ (423,800 ) Common stock (215,000 ) (78,000 ) (215,000 ) Additional paid-in capital (49,000 ) 0 (49,000 ) Noncontrolling interest in Syber 0 0 (96,500 ) Retained earnings (above) (932,400 ) (417,000 ) (932,400 ) Total liabilities and equities $ (1,561,400 ) $ (614,000 ) $ (1,716,700 )
What was the ending Noncontrolling Interest in Syber Company computed?
Explanation / Answer
What was the ending Noncontrolling Interest in Syber Company computed? Book value of subsidiary—1/1 ($328,000 + $78000) $406,000.00 Unrealized gross profit in beginning inventory (calculated below) $5,000.00 Realized book value $401,000.00 Excess allocation at 1/1 ($298000 - ($138,000 + $157,000) + 32500 $35,500.00 Subsidiary valuation basis 1/1 $436,500.00 Noncontrolling interest percentage 20.00% Noncontrolling interest 1/1 $87,300.00 Noncontrolling interest in Soludan's income (as reported) $17,700.00 Noncontrolling interest in Soludan's dividends ($49,000 × 20%) -$9,800.00 Ending noncontrolling interest $95,200.00 Balance of intra entity Gross profit ($407,000 - $388,000) $19,000.00 $388,000 figure reported for consolidated inventory rather than the $407,000 total for the two companies. Intra entry inventory sales = (990000+790000) -1622000 $158,000.00 Consolidated cost of goods sold is decreased by $158,000 to (595000+495000-$158000 = $932,000 ) in eliminating intra-entity sales The increase of $19,000 created by the ending unrealized gross profit would then leave a $951,000 balance. Because $946,000 is the ending balance reported for consolidated cost of goods sold, an $5,000 unrealized gross profit must have been deferred from the previous year