On January 1, Year 2, PAT Ltd. acquired 90% of SAT Inc. when SAT's retained earnings were $1,000,000. There was no acquisition differential. PAT accounts for its investment under the cost method. SAT sells inventory to PAT on a regular basis at a markup of 30% of selling price. The intercompany sales were $160,000 in Year 2 and $190,000 in Year 3. The total amount owing by PAT related to these intercompany sales was $60,000 at the end of Year 2 and $50,000 at the end of Year 3. On January 1, Year 3, the inventory of PAT contained goods purchased from SAT amounting to $70,000, while the December 31, Year 3, inventory contained goods purchased from SAT amounting to $80,000. Both companies pay income tax at the rate of 40%. Selected account balances from the records of PAT and SAT for the year ended December 31, Year 3, were as follows: Inventory Accounts Payable Retained Earnings, Beg. of Year Sales Cost of Sales Income Tax Expense PAT $510,000 700,000 2,500,000 4,100,000 3,200,000 180,000 SAT $400,000 420,000 1,200,000 2,600,000 1,800,000 150,000 Determine the amount to report on the Year 3 consolidated financial statements for the selected accounts noted above.
On January 1, Year 2, PAT Ltd. acquired 90% of SAT Inc. when SAT's retained earnings were $1,000,000. There was no acquisition differential. PAT accounts for its investment under the cost method. SAT sells inventory to PAT on a regular basis at a markup of 30% of selling price. The intercompany sales were $160,000 in Year 2 and $190,000 in Year 3. The total amount owing by PAT related to these intercompany sales was $60,000 at the end of Year 2 and $50,000 at the end of Year 3. On January 1, Year 3, the inventory of PAT contained goods purchased from SAT amounting to $70,000, while the December 31, Year 3, inventory contained goods purchased from SAT amounting to $80,000. Both companies pay income tax at the rate of 40%. Selected account balances from the records of PAT and SAT for the year ended December 31, Year 3, were as follows: Inventory Accounts Payable Retained Earnings, Beg. of Year Sales Cost of Sales Income Tax Expense PAT $510,000 700,000 2,500,000 4,100,000 3,200,000 180,000 SAT $400,000 420,000 1,200,000 2,600,000 1,800,000 150,000 Determine the amount to report on the Year 3 consolidated financial statements for the selected accounts noted above.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, Year 2, PAT Ltd. acquired 90% of SAT Inc. when SAT's retained earnings were
$1,000,000. There was no acquisition differential. PAT accounts for its investment under the cost
method. SAT sells inventory to PAT on a regular basis at a markup of 30% of selling price. The
intercompany sales were $160,000 in Year 2 and $190,000 in Year 3. The total amount owing by PAT
related to these intercompany sales was $60,000 at the end of Year 2 and $50,000 at the end of Year
3. On January 1, Year 3, the inventory of PAT contained goods purchased from SAT amounting to
$70,000, while the December 31, Year 3, inventory contained goods purchased from SAT amounting to
$80,000. Both companies pay income tax at the rate of 40%.
Selected account balances from the records of PAT and SAT for the year ended December 31, Year 3,
were as follows:
Inventory
Accounts Payable
Retained Earnings, Beg. of Year
Sales
Cost of Sales
Income Tax Expense
PAT
$510,000
700,000
2,500,000
4,100,000
3,200,000
180,000
SAT
$400,000
420,000
1,200,000
2,600,000
1,800,000
150,000
Determine the amount to report on the Year 3 consolidated financial statements for the selected
accounts noted above.
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