Plug Products owns 80 percent of the stock of Spark Filter Company, which it acquired at underlying book value on August 30, 20X6. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of Spark Filter. Summarized trial balance data for the two companies as of December 31, 20X8, are as follows: Plug Products Spark Filter Company Credit Debit Credit Debit Cash and Accounts Receivable $ 146,000 $ 95,000 Inventory 236,000 119,000 Buildings and Equipment (net) 288,000 187,000 Investment in Spark Filter Company 267,789 Cost of Goods Sold 172,000 137,000 Depreciation Expense 40,000 30,000 Current Liabilities $ 170,147 $ 53,947 Common Stock 192,000 73,000 Retained Earnings 460,000 216,000 Sales 275,053 225,053 Income from Spark Filter Company 52,589 Total $ 1,149,789 $ 1,149,789 $ 568,000 $ 568,000 On January 1, 20X8, Plug's inventory contained filters purchased for $77,000 from Spark Filter, which had produced the filters for $57,000. In 20X8, Spark Filter spent $117,000 to produce additional filters, which it sold to Plug for $158,053. By December 31, 20X8, Plug had sold all filters that had been on hand January 1, 20X8, but continued to hold in inventory $47,416 of the 20X8 purchase from Spark Filter. Compute consolidated net income and income assigned to the controlling interest in the 20X8 consolidated income statement.

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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Plug Products owns 80 percent of the stock of Spark Filter Company, which it acquired at underlying book value on August 30, 20X6. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of Spark Filter. Summarized trial balance data for the two companies as of December 31, 20X8, are as follows:

	Plug Products	Spark Filter Company
Credit	Debit	Credit	Debit
Cash and Accounts Receivable	$ 146,000		$ 95,000
Inventory	236,000		119,000
Buildings and Equipment (net)	288,000		187,000
Investment in Spark Filter Company	267,789
Cost of Goods Sold	172,000		137,000
Depreciation Expense	40,000		30,000
Current Liabilities		$ 170,147		$ 53,947
Common Stock		192,000		73,000
Retained Earnings		460,000		216,000
Sales		275,053		225,053
Income from Spark Filter Company		52,589
Total	$ 1,149,789	$ 1,149,789	$ 568,000	$ 568,000

On January 1, 20X8, Plug's inventory contained filters purchased for $77,000 from Spark Filter, which had produced the filters for $57,000. In 20X8, Spark Filter spent $117,000 to produce additional filters, which it sold to Plug for $158,053. By December 31, 20X8, Plug had sold all filters that had been on hand January 1, 20X8, but continued to hold in inventory $47,416 of the 20X8 purchase from Spark Filter.

Compute consolidated net income and income assigned to the controlling interest in the 20X8 consolidated income statement.

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