Parson Syber Company $(600,000) Consolidated Company Totals Sales $ (800,000) $(1,280,000) 784,000 Cost of goods sold Operating expenses. Income of Syber 500,000 400,000 100,000 100,000 202,500 -0- (74,800) $ (274,800) -0- Separate company net income $(100,000) Consolidated net income $ (293,500) Net income attributable to noncontrolling interest... 18,700 Net income attributable to Parson $ (274,800) $ (611,600) (274,800) 70,000 Company . Retained earnings, 1/1/18. Net income (above) Dividends declared.. $ (611,600) (274,800) $(290,000) (100,000) 30,000 70,000 $ (816,400) $ 298,000 Retained earnings, 12/31/18.... $(360,000) $ (816,400) $ 80,000 160,000 -0- $ 358,000 338,000 Cash and receivables... Inventory...... Investment in Syber Company Land, buildings, and equipment. 190,000 368,400 -0- 380,000 260,000 640,000 Trademarks -0- 32,500 $ 1,236,400 $ (270,000) (120,000) (30,000) $ 500,000 $ (60,000) (80,000) -0- $ 1,368,500 $ (310,000) (120,000) (30,000) (92,100) (816,400) $(1,368,500) Total assets Liabilities... Common stock Additional paid-in capital. Noncontrolling interest in Syber. Retained earnings (above).. -0- (360,000) $(500,000) -0- (816,400) $(1,236,400) Total liabilities and equities.
Parson Company acquired an 80 percent interest in Syber Company on January 1, 2017. 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.
Parson Company acquired an 80 percent interest in Syber Company on January 1, 2017. 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.
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. How was the ending Noncontrolling Interest in Syber Company computed?
i. With a tax rate of 40 percent, what income tax
j. With a tax rate of 40 percent, what income tax journal entry is recorded if these two companies prepare separate tax returns?
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