Chapter 7 Homework Saved Help Baxter, Inc., owns 90 percent of Wisconsin, Inc, a
ID: 2538613 • Letter: C
Question
Chapter 7 Homework Saved Help Baxter, Inc., owns 90 percent of Wisconsin, Inc, and 20 percent of Cleveland Company. Wisconsin, in turn, holds 60 percent of Cleveland's outstanding stock. No excess amortization resulted from these acquisitions. During the current year, Cleveland sold a variety of inventory items to Wisconsin for $40,000 although the original cost was $30,000. Of this total, Wisconsin stll held $12,000 in inventory (at transfer price) at year-end. 1.5 points During this same period, Wisconsin sold merchandise to Baxter for $100,000 although the original cost was only $70,000. At year-end, $40,000 of these goods (at the transfer price) was still on hand. The initial value method was used to record each of these investments. None of the companies holds any other investments Print Using the following seperate income statements, determine the figures thet would appear on a consoldated income statement BaxterWisconsin Cleveland Sales Coat of goods sold Expensos Dividend incones (,000,000) $(450,000) $(280,000 280,000 190,000 30,000 670,000 110,000 60,000 (36,000) isconsin cleveland Mot ineone Sales Cost of goods sold Expenses Dividend income Controlling interest in consolidated net incomeExplanation / Answer
Calculate mark up for Cleveland and wisconsin Cleveland(40000-30000)/40000 0.25 wisconsin (100000-70000)/100000 0.3 Calculate unrelaized gross profit for the subsidiary using mark up Cleveland company (12000*25%) 3000 Wisconsin company ( 40000*30%) 12000 Sales ( 1000000+450000+280000)-40000-100000 1590000 Cost of goods sold(670000+280000+190000)-(40000+100000)+(3000+12000) 1015000 Expenses (110000+60000-30000) 200000 Dividend income Consolidated Net income 375000 Non controlling interest in subsidiary 24620 Controlling interest in consolidated net income (375000-24620) 350380 *Non controlling interest of Cleverlan((280000-190000-30000)-12000)*20% 11400 non controlling interest of W (110000-12000+34200)*10% 13220 24620