Transfer Price to Pitino Inventory Remalning at Year-End (at transfer price) Year Cost to Brey 2016 $69,000 $115,000 $25,000 37,500 50,000 2017 81,000 160,000 92,800 Pitino Brey Sales revenues Cost of goods sold Expenses..... Equity in earnings of Brey $ (862,000) 515,000 $(366,000) 209,000 185,400 67,000 (68,400) -0- $ (230,000) $ (488,000) (230,000) 136,000 Net income $ (90,000) Retained earnings, 1/1/18 Net income (above) Dividends declared $(278,000) (90,000) 27,000 $(341,000) $ (582,000) $ 146,000 255,000 450,000 964,000 $ 1,815,000 $ (718,000) (515,000) (582,000) $(1,815,000) Retained earnings, 12/31/18 Cash and receivables Inventory ... Investment in Brey ... Land, buildings, and equipment (net) $ 98,000 136,000 -0- 328,000 $ 562,000 $ (71,000) (150,000) (341,000) $(562,000) Total assets Liabilities Common stock Retained earnings, 12/31/18 Total liabilities and equities.
Pitino acquired 90 percent of Brey’s outstanding shares on January 1, 2016, in exchange for $342,000 in cash. The subsidiary’s
Brey reported net income from its own operations of $64,000 in 2016 and $80,000 in 2017. Brey declared dividends of $19,000 in 2016 and $23,000 in 2017.
Brey sells inventory to Pitino as follows:
At December 31, 2018, Pitino owes Brey $16,000 for inventory acquired during the period.
The following separate account balances are for these two companies for December 31, 2018, and the year then ended. Credits are indicated by parentheses.
Answer each of the following questions:
a. What was the annual amortization resulting from the acquisition-date fair-value allocations?
b. Were the intra-entity transfers upstream or downstream?
c. What intra-entity gross profit in inventory existed as of January 1, 2018?
d. What intra-entity gross profit in inventory existed as of December 31, 2018?
e. What amounts make up the $68,400 Equity Earnings of Brey account balance for 2018?
f. What is the net income attributable to the noncontrolling interest for 2018?
g. What amounts make up the $450,000 Investment in Brey account balance as of December 31, 2018?
h. Prepare the 2018 worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances.
i. Without preparing a worksheet or consolidation entries, determine the consolidation balances for these two companies.
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