Pitino acquired 90 percent of Brey\'s outstanding shares on January 1, 2013, in
ID: 2553254 • Letter: P
Question
Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2013, in exchange for $567,000 in cash. The subsidiary's stockholders' equity accounts totaled $551,000 and the noncontrolling interest had a fair value of $63,000 on that day. However, a building (with a ten-year remaining life) in Brey's accounting records was undervalued by $38,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (five-year remaining life) Brey reported net income from its own operations of $89,000 in 2013 and $105,000 in 2014. Brey declared dividends of $31,500 in 2013 and $35,500 in 2014 Brey sells inventory to Pitino as follows: Year 2013 2014 2015 Cost to Brey $ 94,000 143,000 171,000 Transfer Price to Pitino $240,000 260,000 285,000 Inventory Remaining at Year-End (at transfer price) S 50,000 62,000 65,000 At December 31, 2015, Pitino owes Brey $41,000 for inventory acquired during the period. The following separate account balances are for these two companies for December 31, 2015, and the year then ended. Note: Parentheses indicate a credit balance. Pitino Brey Sales revenues Cost of goods sold Expenses Equity in earnings of Brey $ (912,000) $(491,000) 234,000 108,000 540,000 187,900 (125,010) $ (309,110) $(149,000) $ (538,000) $(328,000) 61,000 $ (693,110) $(416,000) Net income Retained earnings, 1/1/15 Net income (above) Dividends declared (149,000) 154,000 Retained earnings, 12/31/15 $ 171,000 380,000 704,700 123,000 Cash and receivables Inventory Investment in Brey Land, buildings, and equipment (net) 310,000 989,000353,000 $2,244,700 $786,000 Total assets Liabilities Common stock Retained earnings, 12/31/15 $ (911,590) (20,000) (640,000) (350,000) (693,110) (416,000) Total liabilities and equity $(2.244,700) $(786,000)Explanation / Answer
Consolidated Balance Sheet Slaes Revenue -1403000 Cost of goods sold 774000 Expenses 295900 Equity in Earnings of Brey -125010 Non Controlling Interest in Consolidated Net Income -14900 Consolidated Net income to parent -443210 Retained earnings, 1/1 -866000 Divedend declared 215000 Retained earnings, 12/31 -1109110 Cash & receivables 294000 Inventory 690000 Investment in Brey 704700 Land, building & equipment 1342000 Patended Technology 0 Total assets 3030700 Liabilities -929590 Non Controlling Interest in Brey, 12/31 -2000 Common stock -990000 Retained earnings, 12/31 -1109110 Total Liabilities & Stock Holders equity -3030700