Chapter 5, Problem 18P

a.

To determine

Find the consolidated net income for Company P and its subsidiary.

Explanation of Solution

Computation of consolidated net income for Company P and its subsidiary:

Particulars	Amount
Net income of Company P	$    300,000
Net income of Company S	$    110,000
Unrealized profit of year 2014	$        7,200
Unrealized profit of year 2015	$     (16,200)
Excess amortization	$       (5,000)
Consolidated net income	$    396,000

Table: (1)

b.

To determine

Find the consolidated net income to be allocated to the controlling and non-controlling interest if the intra-entity sales were upstream.

Explanation of Solution

Computation of consolidated net income to be allocated to the controlling and non-controlling interest if the intra-entity sales were upstream:

Particulars	Amount
Reported income of Subsidiary	$    110,000
Add: Unrealized gross profit of 2014	$        7,200
Less: Unrealized gross profit of 2015	$     (16,200)
Less: Excess amortization	$       (5,000)
Income to subsidiary to be consolidated	$      96,000
Percent of ownership of non-controlling interest	20%
Net income attributable to non-controlling interest	$      19,200
Percent of ownership of controlling interest	80%
Net income attributable to controlling interest	$      76,800

Table: (2)

c.

To determine

Find the consolidated net income to be allocated to the controlling and non-controlling interest if the intra-entity sales were downstream.

Explanation of Solution

Computation of consolidated net income to be allocated to the controlling and non-controlling interest if the intra-entity sales were downstream:

Particulars	Amount
Reported income of Subsidiary	$    110,000
Less: Excess amortization	$       (5,000)
Income to subsidiary to be consolidated	$    105,000
Percent of ownership of non-controlling interest	20%
Net income attributable to non-controlling interest	$      21,000
Percent of ownership of controlling interest	80%
Net income attributable to controlling interest	$      84,000

Table: (3)

d.

To determine

Find the consolidated balance in the ending Inventory account.

Explanation of Solution

Computation of consolidated balance in the ending Inventory account:

Particulars	Amount
Balance of Company P	$             140,000
Add: Balance of inventory of Company S	$             90,000
Add: Defer unrealized gross profit of 2015	$            (16,200)
Consolidated balance of cost of goods sold	$           213,800

Table: (4)

Thus, the consolidated total for inventory at December 31 is $213,800.

e.

To determine

Find the consolidate balance of land in 2015.

Explanation of Solution

Computation of consolidated balance in the Land account:

Particulars	Amount
Balance of Company P	$             600,000
Add: Balance of land of Company S	$             200,000
Add: Defer unrealized profit of 2015	$            (20,000)
Consolidated balance of cost of goods sold	$           780,000

Table: (5)

Thus, the consolidated total for land at December 31 is $780,000.

f.

To determine

Provide the worksheet entries to eliminate intra-entity transfer and find the non-controlling interest’s share of Company S’s net income.

Explanation of Solution

The worksheet entries to eliminate intra-entity transfer:

Entry TA
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Equipment		$ 20,000
	Investment in Company S		$ 16,000
	Accumulated Depreciation			$ 36,000
	(Being excess depreciation eliminated)
Entry ED
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Accumulated Depreciation		$   4,000
	Depreciation expense			$   4,000
	(being excess depreciation eliminated)

Table: (6)

Computation of the non-controlling interest’s share of Company S’s net income:

Particulars	Amount
Reported income of Subsidiary	$    110,000
Less: Excess amortization	$      (5,000)
Less: Gain on sale of equipment	$     (12,000)
Income to subsidiary to be consolidated	$      93,000
Percent of ownership of non-controlling interest	20%
Net income attributable to non-controlling interest	$      18,600

Table: (7)