Following are several figures reported for Allister and Barone as of December 31
ID: 2571849 • Letter: F
Question
Following are several figures reported for Allister and Barone as of December 31, 2018:
Allister acquired 90 percent of Barone in January 2017. In allocating the newly acquired subsidiary's fair value at the acquisition date, Allister noted that Barone had developed a customer list worth $72,000 that was unrecorded on its accounting records and had a 6-year remaining life. Any remaining excess fair value over Barone's book value was attributed to goodwill. During 2018, Barone sells inventory costing $138,000 to Allister for $196,000. Of this amount, 20 percent remains unsold in Allister's warehouse at year-end.
Determine balances for the following items that would appear on Allister's consolidated financial statements for 2018:
Explanation / Answer
Solution:-
Explanation:-
Customer list amortization = $72,000 ÷ 6 years = $12,000 per year
Unlealized profit:-
1.
Inventory = $948,400 (add the two book values and subtract the ending unrealized gross profit of$11,600)
2.
Sales = $1,924,000 (add the two book values and subtract the $196,000 intra-entity transfer)
3.
Cost of goods sold = $875,600 (add the two book values and subtract the intra-entity transfer and add[to defer] ending unrealized gross profit)
4.
Operating expenses = $622,000 (add the two book values and the amortization expense for the period)
5.
Net income attributable to Noncontrolling Interest = $11,640 (10 percent of Barone’s $140,000 net income less 12,000 excess fair value amortization and deferring $11,600 ending unrealized grossprofit). Gross profit is included in this computation because the transfer was upstream from Barone to Allister.
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Particulars Amount Explanation Inventory $ 948,400 1 Sales $ 1,924,000 2 Cost of goods sold $ 875,600 3 Operating expenses $ 622,000 4 Net income attributable to noncontrolling interest $ 11,640 5