Parson Company Syber Company Consolidated Totals Sales $ (744,000 ) $ (654,000 ) $ (1,223,000 ) Cost of goods sold 450,000 412,000 691,000 Operating expenses 104,000 107,000 213,300 Income of Syber (102,960 ) 0 0 Separate company net income $ (292,960 ) $ (135,000 ) Consolidated net income $ (318,700 ) Net income attributable to noncontrolling interest 25,740 Net income attributable to Parson Company $ (292,960 ) Retained earnings, 1/1/21 $ (592,320 ) $ (316,000 ) $ (592,320 ) Net income (above) (292,960 ) (135,000 ) (292,960 ) Dividends declared 63,000 27,000 63,000 Retained earnings, 12/31/21 $ (822,280 ) $ (424,000 ) $ (822,280 ) Cash and receivables $ 280,000 $ 78,000 $ 333,000 Inventory 194,000 154,000 335,000 Investment in Syber Company 418,320 0 0 Land, buildings, and equipment 414,000 345,000 759,000 Trademarks 0 0 29,900 Total assets $ 1,306,320 $ 577,000 $ 1,456,900 Liabilities $ (342,040 ) $ (71,000 ) $ (388,040 ) Common stock (112,000 ) (82,000 ) (112,000 ) Additional paid-in capital (30,000 ) 0 (30,000 ) Noncontrolling interest in Syber 0 0 (104,580 ) Retained earnings (above) (822,280 ) (424,000 ) (822,280 ) Total liabilities and equities $ (1,306,320 ) $ (577,000 ) $ (1,456,900 )
| Parson Company |
Syber Company |
Consolidated Totals |
|||||||||
| Sales | $ | (744,000 | ) | $ | (654,000 | ) | $ | (1,223,000 | ) | ||
| Cost of goods sold | 450,000 | 412,000 | 691,000 | ||||||||
| Operating expenses | 104,000 | 107,000 | 213,300 | ||||||||
| Income of Syber | (102,960 | ) | 0 | 0 | |||||||
| Separate company net income | $ | (292,960 | ) | $ | (135,000 | ) | |||||
| Consolidated net income | $ | (318,700 | ) | ||||||||
| Net income attributable to noncontrolling interest | 25,740 | ||||||||||
| Net income attributable to Parson Company | $ | (292,960 | ) | ||||||||
| $ | (592,320 | ) | $ | (316,000 | ) | $ | (592,320 | ) | |||
| Net income (above) | (292,960 | ) | (135,000 | ) | (292,960 | ) | |||||
| Dividends declared | 63,000 | 27,000 | 63,000 | ||||||||
| Retained earnings, 12/31/21 | $ | (822,280 | ) | $ | (424,000 | ) | $ | (822,280 | ) | ||
| Cash and receivables | $ | 280,000 | $ | 78,000 | $ | 333,000 | |||||
| Inventory | 194,000 | 154,000 | 335,000 | ||||||||
| Investment in Syber Company | 418,320 | 0 | 0 | ||||||||
| Land, buildings, and equipment | 414,000 | 345,000 | 759,000 | ||||||||
| Trademarks | 0 | 0 | 29,900 | ||||||||
| Total assets | $ | 1,306,320 | $ | 577,000 | $ | 1,456,900 | |||||
| Liabilities | $ | (342,040 | ) | $ | (71,000 | ) | $ | (388,040 | ) | ||
| Common stock | (112,000 | ) | (82,000 | ) | (112,000 | ) | |||||
| Additional paid-in capital | (30,000 | ) | 0 | (30,000 | ) | ||||||
| Noncontrolling interest in Syber | 0 | 0 | (104,580 | ) | |||||||
| Retained earnings (above) | (822,280 | ) | (424,000 | ) | (822,280 | ) | |||||
| Total liabilities and equities | $ | (1,306,320 | ) | $ | (577,000 | ) | $ | (1,456,900 | ) |
Working Notes:
1. Income tax expenses
= Consolidated net income x tax rate
= $318,700x 21%
= $66,927
2. Income tax expenses
=(Net income - Income of syber) x tax rate
= ($292,960-$102,960) x 21%
= $190,000x 21%
= $39,900
3. Income tax expenses
= (Net income-Amortization of trademarks-Profit on intercompany transaction) x tax rate
= ($135,000-$2,300-$$4,000) x 21%
= $128,700x 21 %
= $27,027
Note:
1. Information Not Provided in the question. It is assumed that 15-year life of Trademarks (2 years lapse)
Trademarks = $29,900 / 13 Years
= $2,300
2. Current Year Intra-Entity Inventory Sales
= Parson Company Sales + Syber Company Sales - Consolidated Total of Sales
= $744,000+ $654,000- $1,223,000
= $175,000
3. Current Year Intra-Entity Inventory Cost of goods sold
= Parson Company Cost of goods sold+ Syber Company Cost of goods sold- Consolidated Total of Cost of goods sold
= $450,000+ $412,000- $691,000
= $171,000
4. Profit on the intercompany transaction
Current Year Intra-Entity Inventory Sales - Current Year Intra-Entity Inventory Cost of goods sold
= $175,000 - $171,000
= $4,000
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