Following are several figures reported for Allister and Barone as of December 31
ID: 2597896 • Letter: F
Question
Following are several figures reported for Allister and Barone as of December 31, 2018 600,000 $400,000 1,200, 000 1,000,000 Inventory Investment income not given Cost of goods sold 600,000 500,000 operating expenses 280,000350,000 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 $76,000 that was unrecorded on its accounting records and had a 5-year remaining life. Any remaining excess fair value over Barone's book value was attributed to goodwill. During 2018, Barone sells inventory costing $140,000 to Allister for $200,000. Of this amount, 15 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 nts Inventory Sales Cost of sold 3 of 4 Next,>Explanation / Answer
Compute consolidated inventory:
Parent and subsidiary balances are combined. Any unrealized gross profit remaining at the end of the current year is removed to adjust the reported balance to historical cost.
Inventory = (parent balance + subsidiary Balance – unrealized gross profit remaining at the end)
= $600,000+$400,000-$9000
= $991,000
WN:
Unrealized gross profit at the end = (15% of $200,000) x ($200,000 - $140,000 x 100%)
$200,000
= 30000 x .3
= $9000
Calculate Sales:
Parent and subsidiary balances are combined, but all intra entity transfers are then removed
Sales = Parent balance + subsidiary balance – Intra entity transfer
$1,200,000+$1,000,000-$200,000
= $2,000,000
Calculate COGS:
COGS= (parent balance+ subsidiary balance-intra entity transfer-beginning unrealized gross profit+ ending unrealized gross profit)
$600,000+$500,000-$200,000+9000
= $909,000
WN:
Calculate ending unrealized gross profit
= ending inventory of A company x Gross profit rate of B company)
= (((15% of $200,000) x (($200,000-$140,000/$200,000) x 100%))
30000x1x.3
=$9000
Calculate operating expenses:
Annual excess fair value amortization = Excess allocated fair value/remaining useful life
= $76000/5
= $15,200
Operating expenses = $280,000+$350,000+$15,200
= $645,200
Calculate Net Income:
Reported Net Income = Sales-(COGS + operating expenses)
= $1,000,000-($500,000+$350,000)
= $150,000
Net Income attributable to non- controlling interest:
= (Reported Net income+ Unrealized gross profit of 2017- Unrealized gross profit of 2018-Excess amortization expenses) x 15% outside ownership
= ($150,000+0-$9,000-15,200) x 15%
= $125,800 x 15%
= $18,870
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