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3ybel business fair value in excess of its corresponding book value was assigned to trademarks. This intangible asse subsequently undergone annual amortization based on a 15-year life. Over the past two years, regular intra-en inventory sales transpired between the two companies. No payment has yet been made on the latest transfer. dividends are paid in the same period as declared.

3ybel business fair value in excess of its corresponding book value was assigned to trademarks. This intangible asse subsequently undergone annual amortization based on a 15-year life. Over the past two years, regular intra-en inventory sales transpired between the two companies. No payment has yet been made on the latest transfer. dividends are paid in the same period as declared.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Parson Company acquired an 80 percent interest in Syber Company on January 1, 2020. 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 2021 follow (credit balances indicated by parentheses):
Transcribed Image Text:Parson Company acquired an 80 percent interest in Syber Company on January 1, 2020. 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 2021 follow (credit balances indicated by parentheses):
Syber Company $(600,000) 400,000 100,000 Parson Consolidated Totals Company $ (800,000) 500,000 $(1,280,000) 784,000 202,500 Sales Cost of goods sold Operating expenses Income of Syber 100,000 (74,800) $ (274,800) Separate company net income $(100,000) (293,500) 18,700 (274,800) Consolidated net income $ Net income attributable to noncontrolling interest 2$ Net income attributable to Parson Company Retained earnings, 1/1/21 Net income (above) $ (611,600) (274,800) $(290,000) (100,000) 30,000 $(360,000) $(611,600) (274,800) Dividends declared 70,000 (816,400) 70,000 (816,400) Retained earnings, 12/31/21 2$ $ 80,000 160,000 298,000 190,000 368,400 380,000 Cash and receivables 358,000 Inventory Investment in Syber Company Land, buildings, and equipment 338,000 260,000 640,000 Trademarks 32,500 $ 1,368,500 $ 500,000 $ (60,000) (80,000) Total assets $ 1,236,400 $(270,000) (120,000) (30,000) $(310,000) (120,000) (30,000) (92,100) (816,400) Liabilities Common stock Additional paid-in capital Noncontrolling interest in Syber Retained earnings (above) (816,400) (360,000) Total liabilities and equities $(1,236,400) $(500,000) $(1,368,500) a. What method does Parson use to account for its investment in Syber? b. What is the balance of the intra-entity inventory gross profit deferred at the end of the current period? c. What amount was originally allocated to the trademarks? d. What is the amount of the current-year intra-entity inventory sales? e. Were the intra-entity inventory sales made upstream or downstream? f. What is the balance of the intra-entity liability at the end of the current year? g. What amount of intra-entity gross profit was deferred from the preceding period and recognized in the current period? h. What was the ending Noncontrolling Interest in Syber Company computed? i. With a tax rate of 21 percent, what income tax journal entry is recorded if the companies prepare a consolidated tax return? j. With a tax rate of 21 percent, what income tax journal entry is recorded if these two companies prepare separate tax returns?
Transcribed Image Text:Syber Company $(600,000) 400,000 100,000 Parson Consolidated Totals Company $ (800,000) 500,000 $(1,280,000) 784,000 202,500 Sales Cost of goods sold Operating expenses Income of Syber 100,000 (74,800) $ (274,800) Separate company net income $(100,000) (293,500) 18,700 (274,800) Consolidated net income $ Net income attributable to noncontrolling interest 2$ Net income attributable to Parson Company Retained earnings, 1/1/21 Net income (above) $ (611,600) (274,800) $(290,000) (100,000) 30,000 $(360,000) $(611,600) (274,800) Dividends declared 70,000 (816,400) 70,000 (816,400) Retained earnings, 12/31/21 2$ $ 80,000 160,000 298,000 190,000 368,400 380,000 Cash and receivables 358,000 Inventory Investment in Syber Company Land, buildings, and equipment 338,000 260,000 640,000 Trademarks 32,500 $ 1,368,500 $ 500,000 $ (60,000) (80,000) Total assets $ 1,236,400 $(270,000) (120,000) (30,000) $(310,000) (120,000) (30,000) (92,100) (816,400) Liabilities Common stock Additional paid-in capital Noncontrolling interest in Syber Retained earnings (above) (816,400) (360,000) Total liabilities and equities $(1,236,400) $(500,000) $(1,368,500) a. What method does Parson use to account for its investment in Syber? b. What is the balance of the intra-entity inventory gross profit deferred at the end of the current period? c. What amount was originally allocated to the trademarks? d. What is the amount of the current-year intra-entity inventory sales? e. Were the intra-entity inventory sales made upstream or downstream? f. What is the balance of the intra-entity liability at the end of the current year? g. What amount of intra-entity gross profit was deferred from the preceding period and recognized in the current period? h. What was the ending Noncontrolling Interest in Syber Company computed? i. With a tax rate of 21 percent, what income tax journal entry is recorded if the companies prepare a consolidated tax return? j. With a tax rate of 21 percent, what income tax journal entry is recorded if these two companies prepare separate tax returns?
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