Find the annual amortization resulting from the acquisition-date fair-value allocations.

Question

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Answer 1

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 27P

a.

To determine

Find the annual amortization resulting from the acquisition-date fair-value allocations.

a.

Expert Solution

Explanation of Solution

Particulars	Amount
Consideration paid	$ 342,000
Fair value of non-controlling interest	$ 38,000
Fair value on date of acquisition	$ 380,000
Book value of the subsidiary	$ (326,000)
Excess fair value over book value	$ 54,000
		Remaining life	Annual amortization
Building	$ 18,000	9 years	$ 2,000
Patented technology	$ 36,000	6 years	$ 6,000
Total	$ 54,000		$ 8,000

Table: (1)

b.

To determine

Identify whether the intra-entity transfers are upstream or downstream.

b.

Expert Solution

Explanation of Solution

Company B has transferred goods to Company P which implies that it is an upstream transfer because goods are transferred from the subsidiary to the parent.

c.

To determine

Find the intra-entity gross profit in inventory existed as of January 1, 2015.

c.

Expert Solution

Explanation of Solution

Computation of unrealized gross profit:

Particulars	Amount
Intra-entity gross profit percentage ($135,000 − $81,000$135,000 × 100)	40%
Inventory unsold at year end	$ 37,500
Unrealized gross profit as on January 1, 2015	$ 15,000

Table: (2)

d.

To determine

Find the intra-entity gross profit in inventory existed as of December 31, 2015.

d.

Expert Solution

Explanation of Solution

Computation of unrealized gross profit:

Particulars	Amount
Intra-entity gross profit percentage ($160,000 − $92,800$160,000 × 100)	42%
Inventory unsold at year end	$ 37,500
Unrealized gross profit as on December 31, 2015	$ 21,000

Table: (3)

e.

To determine

Find the amounts which make up the $68,400 Equity Earnings of Company B account balance for 2015.

e.

Expert Solution

Explanation of Solution

Computation of the amounts which make up the $68,400 Equity Earnings of Company B account balance for 2015:

Particulars	Amount
Reported income of Subsidiary	$ 90,000
Add: Unrealized gross profit of 2014	$ 15,000
Less: Unrealized gross profit of 2015	$ (21,000)
Less: Amortization of patented technology	$ (6,000)
Less: Excess amortization of building	$ (2,000)
Adjusted income of subsidiary	$ 76,000
Percent of ownership of controlling interest	90%
Equity in earnings of Company B	$ 68,400

Table: (4)

f.

To determine

Find the net income attributable to the non-controlling interest for 2015.

f.

Expert Solution

Explanation of Solution

Computation of the net income attributable to the non-controlling interest for 2015:

Particulars	Amount
Reported income of Subsidiary	$ 90,000
Add: Unrealized gross profit of 2014	$ 15,000
Less: Unrealized gross profit of 2015	$ (21,000)
Less: Amortization of patented technology	$ (6,000)
Less: Excess amortization of building	$ (2,000)
Adjusted income of subsidiary	$ 76,000
Percent of ownership of controlling interest	10%
Equity in earnings of Company B	$ 7,600

Table: (5)

g.

To determine

Find the amounts which make up the $450,000 Investment in Company B account balance as of December 31, 2015.

g.

Expert Solution

Explanation of Solution

Computation of the amounts which make up the $450,000 Investment in Company B account balance as of December 31, 2015:

Particulars	Amount
Investment purchased	$ 342,000
Reported net income of 2013	$ 64,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2013	$ (10,000)
Adjusted net income of year 2014	$ 46,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 41,400
Equity in earnings of Company B	$ 41,400
Share of Company P in dividends	$ (17,100)
Balance as on 31/12/2013	$ 366,300
Reported income of Company B	$ 80,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2013 recognized	$ 10,000
Deferred profit of 2014	$ (15,000)
Adjusted net income of year 2014	$ 67,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 60,300
Equity in earnings of Company B	$ 60,300
Share of Company P in dividends	$ (20,700)
Balance as on 31/12/2014	$ 405,900
Reported income of Company B	$ 90,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2014 recognized	$ 15,000
Deferred profit of 2015	$ (21,000)
Adjusted net income of year 2015	$ 76,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 68,400
Equity in earnings of Company B	$ 68,400
Share of Company P in dividends	$ (24,300)
Balance as on 31/12/2015	$ 450,000

Table: (6)

h.

To determine

Prepare the 2015 worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances.

h.

Expert Solution

Explanation of Solution

The worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances:

Entry S
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Common stock		$ 150,000
	Retained earnings on 01/01/2014		$ 263,000
	Investment in Company B			$ 371,700
	Non controlling interest			$ 41,300
	(being controlling and non-controlling interest recorded)

Table: (7)

i.

To determine

Determine the consolidation balances for these two companies.

i.

Expert Solution

Explanation of Solution

The consolidation balances for these two companies are as follows:

Company P and Company B
Consolidation Worksheet
Year ending December 31, 2015
Income statement	Company P	Company B	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	($862,000)	($366,000)	$160,000			($1,068,000)
Cost of goods sold	$515,000	$209,000	$21,000	$15,000		$570,000
				$160,000
Operating expense	$185,400	$67,000	$8,000			$260,400
Equity in income of Company B	($68,400)		$68,400			$ -
Net income	($230,000)	($90,000)
Consolidated net income						($237,600)
Share of non-controlling interest in net income					($7,600)	$7,600
Share of controlling interest in net income						($230,000)

Balance Sheet
Cash	$146,000	$98,000		$16,000		$228,000
Inventory	$255,000	$136,000		$21,000		$370,000
Investment in Company B	$450,000
Building and equipment	$964,000	$328,000	$18,000	$6,000		$1,304,000
Patented technology			$36,000	$18,000		$18,000
Total assets	$1,815,000	$562,000				$1,920,000

Liabilities	($718,000)	($71,000)	$16,000			($773,000)
Common stock	($515,000)	($150,000)				($515,000)
Retained earnings	($582,000)	($341,000)				($582,000)
Non-controlling interest in Company B						($50,000)
Total liabilities and equity	($1,815,000)	($562,000)				$1,920,000

Table: (8)

Working note:

Statement of retained earnings	Company P	Company B	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	($488,000)	($278,000)	$15,000			($488,000)
			($263,000)
Net Income	($230,000)	($90,000)				($230,000)
Dividends declared	$136,000	$27,000		$24,300	$2,700	$136,000
Retained earnings on 31/12	($582,000)	($341,000)				($582,000)

Table: (9)

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Answer 2

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 27P

a.

To determine

Find the annual amortization resulting from the acquisition-date fair-value allocations.

a.

Expert Solution

Explanation of Solution

Particulars	Amount
Consideration paid	$ 342,000
Fair value of non-controlling interest	$ 38,000
Fair value on date of acquisition	$ 380,000
Book value of the subsidiary	$ (326,000)
Excess fair value over book value	$ 54,000
		Remaining life	Annual amortization
Building	$ 18,000	9 years	$ 2,000
Patented technology	$ 36,000	6 years	$ 6,000
Total	$ 54,000		$ 8,000

Table: (1)

b.

To determine

Identify whether the intra-entity transfers are upstream or downstream.

b.

Expert Solution

Explanation of Solution

Company B has transferred goods to Company P which implies that it is an upstream transfer because goods are transferred from the subsidiary to the parent.

c.

To determine

Find the intra-entity gross profit in inventory existed as of January 1, 2015.

c.

Expert Solution

Explanation of Solution

Computation of unrealized gross profit:

Particulars	Amount
Intra-entity gross profit percentage ($135,000 − $81,000$135,000 × 100)	40%
Inventory unsold at year end	$ 37,500
Unrealized gross profit as on January 1, 2015	$ 15,000

Table: (2)

d.

To determine

Find the intra-entity gross profit in inventory existed as of December 31, 2015.

d.

Expert Solution

Explanation of Solution

Computation of unrealized gross profit:

Particulars	Amount
Intra-entity gross profit percentage ($160,000 − $92,800$160,000 × 100)	42%
Inventory unsold at year end	$ 37,500
Unrealized gross profit as on December 31, 2015	$ 21,000

Table: (3)

e.

To determine

Find the amounts which make up the $68,400 Equity Earnings of Company B account balance for 2015.

e.

Expert Solution

Explanation of Solution

Computation of the amounts which make up the $68,400 Equity Earnings of Company B account balance for 2015:

Particulars	Amount
Reported income of Subsidiary	$ 90,000
Add: Unrealized gross profit of 2014	$ 15,000
Less: Unrealized gross profit of 2015	$ (21,000)
Less: Amortization of patented technology	$ (6,000)
Less: Excess amortization of building	$ (2,000)
Adjusted income of subsidiary	$ 76,000
Percent of ownership of controlling interest	90%
Equity in earnings of Company B	$ 68,400

Table: (4)

f.

To determine

Find the net income attributable to the non-controlling interest for 2015.

f.

Expert Solution

Explanation of Solution

Computation of the net income attributable to the non-controlling interest for 2015:

Particulars	Amount
Reported income of Subsidiary	$ 90,000
Add: Unrealized gross profit of 2014	$ 15,000
Less: Unrealized gross profit of 2015	$ (21,000)
Less: Amortization of patented technology	$ (6,000)
Less: Excess amortization of building	$ (2,000)
Adjusted income of subsidiary	$ 76,000
Percent of ownership of controlling interest	10%
Equity in earnings of Company B	$ 7,600

Table: (5)

g.

To determine

Find the amounts which make up the $450,000 Investment in Company B account balance as of December 31, 2015.

g.

Expert Solution

Explanation of Solution

Computation of the amounts which make up the $450,000 Investment in Company B account balance as of December 31, 2015:

Particulars	Amount
Investment purchased	$ 342,000
Reported net income of 2013	$ 64,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2013	$ (10,000)
Adjusted net income of year 2014	$ 46,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 41,400
Equity in earnings of Company B	$ 41,400
Share of Company P in dividends	$ (17,100)
Balance as on 31/12/2013	$ 366,300
Reported income of Company B	$ 80,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2013 recognized	$ 10,000
Deferred profit of 2014	$ (15,000)
Adjusted net income of year 2014	$ 67,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 60,300
Equity in earnings of Company B	$ 60,300
Share of Company P in dividends	$ (20,700)
Balance as on 31/12/2014	$ 405,900
Reported income of Company B	$ 90,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2014 recognized	$ 15,000
Deferred profit of 2015	$ (21,000)
Adjusted net income of year 2015	$ 76,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 68,400
Equity in earnings of Company B	$ 68,400
Share of Company P in dividends	$ (24,300)
Balance as on 31/12/2015	$ 450,000

Table: (6)

h.

To determine

Prepare the 2015 worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances.

h.

Expert Solution

Explanation of Solution

The worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances:

Entry S
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Common stock		$ 150,000
	Retained earnings on 01/01/2014		$ 263,000
	Investment in Company B			$ 371,700
	Non controlling interest			$ 41,300
	(being controlling and non-controlling interest recorded)

Table: (7)

i.

To determine

Determine the consolidation balances for these two companies.

i.

Expert Solution

Explanation of Solution

The consolidation balances for these two companies are as follows:

Company P and Company B
Consolidation Worksheet
Year ending December 31, 2015
Income statement	Company P	Company B	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	($862,000)	($366,000)	$160,000			($1,068,000)
Cost of goods sold	$515,000	$209,000	$21,000	$15,000		$570,000
				$160,000
Operating expense	$185,400	$67,000	$8,000			$260,400
Equity in income of Company B	($68,400)		$68,400			$ -
Net income	($230,000)	($90,000)
Consolidated net income						($237,600)
Share of non-controlling interest in net income					($7,600)	$7,600
Share of controlling interest in net income						($230,000)

Balance Sheet
Cash	$146,000	$98,000		$16,000		$228,000
Inventory	$255,000	$136,000		$21,000		$370,000
Investment in Company B	$450,000
Building and equipment	$964,000	$328,000	$18,000	$6,000		$1,304,000
Patented technology			$36,000	$18,000		$18,000
Total assets	$1,815,000	$562,000				$1,920,000

Liabilities	($718,000)	($71,000)	$16,000			($773,000)
Common stock	($515,000)	($150,000)				($515,000)
Retained earnings	($582,000)	($341,000)				($582,000)
Non-controlling interest in Company B						($50,000)
Total liabilities and equity	($1,815,000)	($562,000)				$1,920,000

Table: (8)

Working note:

Statement of retained earnings	Company P	Company B	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	($488,000)	($278,000)	$15,000			($488,000)
			($263,000)
Net Income	($230,000)	($90,000)				($230,000)
Dividends declared	$136,000	$27,000		$24,300	$2,700	$136,000
Retained earnings on 31/12	($582,000)	($341,000)				($582,000)

Table: (9)

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Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 27P

a.

To determine

Find the annual amortization resulting from the acquisition-date fair-value allocations.

a.

Expert Solution

Explanation of Solution

Particulars	Amount
Consideration paid	$ 342,000
Fair value of non-controlling interest	$ 38,000
Fair value on date of acquisition	$ 380,000
Book value of the subsidiary	$ (326,000)
Excess fair value over book value	$ 54,000
		Remaining life	Annual amortization
Building	$ 18,000	9 years	$ 2,000
Patented technology	$ 36,000	6 years	$ 6,000
Total	$ 54,000		$ 8,000

Table: (1)

b.

To determine

Identify whether the intra-entity transfers are upstream or downstream.

b.

Expert Solution

Explanation of Solution

Company B has transferred goods to Company P which implies that it is an upstream transfer because goods are transferred from the subsidiary to the parent.

c.

To determine

Find the intra-entity gross profit in inventory existed as of January 1, 2015.

c.

Expert Solution

Explanation of Solution

Computation of unrealized gross profit:

Particulars	Amount
Intra-entity gross profit percentage ($135,000 − $81,000$135,000 × 100)	40%
Inventory unsold at year end	$ 37,500
Unrealized gross profit as on January 1, 2015	$ 15,000

Table: (2)

d.

To determine

Find the intra-entity gross profit in inventory existed as of December 31, 2015.

d.

Expert Solution

Explanation of Solution

Computation of unrealized gross profit:

Particulars	Amount
Intra-entity gross profit percentage ($160,000 − $92,800$160,000 × 100)	42%
Inventory unsold at year end	$ 37,500
Unrealized gross profit as on December 31, 2015	$ 21,000

Table: (3)

e.

To determine

Find the amounts which make up the $68,400 Equity Earnings of Company B account balance for 2015.

e.

Expert Solution

Explanation of Solution

Computation of the amounts which make up the $68,400 Equity Earnings of Company B account balance for 2015:

Particulars	Amount
Reported income of Subsidiary	$ 90,000
Add: Unrealized gross profit of 2014	$ 15,000
Less: Unrealized gross profit of 2015	$ (21,000)
Less: Amortization of patented technology	$ (6,000)
Less: Excess amortization of building	$ (2,000)
Adjusted income of subsidiary	$ 76,000
Percent of ownership of controlling interest	90%
Equity in earnings of Company B	$ 68,400

Table: (4)

f.

To determine

Find the net income attributable to the non-controlling interest for 2015.

f.

Expert Solution

Explanation of Solution

Computation of the net income attributable to the non-controlling interest for 2015:

Particulars	Amount
Reported income of Subsidiary	$ 90,000
Add: Unrealized gross profit of 2014	$ 15,000
Less: Unrealized gross profit of 2015	$ (21,000)
Less: Amortization of patented technology	$ (6,000)
Less: Excess amortization of building	$ (2,000)
Adjusted income of subsidiary	$ 76,000
Percent of ownership of controlling interest	10%
Equity in earnings of Company B	$ 7,600

Table: (5)

g.

To determine

Find the amounts which make up the $450,000 Investment in Company B account balance as of December 31, 2015.

g.

Expert Solution

Explanation of Solution

Computation of the amounts which make up the $450,000 Investment in Company B account balance as of December 31, 2015:

Particulars	Amount
Investment purchased	$ 342,000
Reported net income of 2013	$ 64,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2013	$ (10,000)
Adjusted net income of year 2014	$ 46,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 41,400
Equity in earnings of Company B	$ 41,400
Share of Company P in dividends	$ (17,100)
Balance as on 31/12/2013	$ 366,300
Reported income of Company B	$ 80,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2013 recognized	$ 10,000
Deferred profit of 2014	$ (15,000)
Adjusted net income of year 2014	$ 67,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 60,300
Equity in earnings of Company B	$ 60,300
Share of Company P in dividends	$ (20,700)
Balance as on 31/12/2014	$ 405,900
Reported income of Company B	$ 90,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2014 recognized	$ 15,000
Deferred profit of 2015	$ (21,000)
Adjusted net income of year 2015	$ 76,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 68,400
Equity in earnings of Company B	$ 68,400
Share of Company P in dividends	$ (24,300)
Balance as on 31/12/2015	$ 450,000

Table: (6)

h.

To determine

Prepare the 2015 worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances.

h.

Expert Solution

Explanation of Solution

The worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances:

Entry S
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Common stock		$ 150,000
	Retained earnings on 01/01/2014		$ 263,000
	Investment in Company B			$ 371,700
	Non controlling interest			$ 41,300
	(being controlling and non-controlling interest recorded)

Table: (7)

i.

To determine

Determine the consolidation balances for these two companies.

i.

Expert Solution

Explanation of Solution

The consolidation balances for these two companies are as follows:

Company P and Company B
Consolidation Worksheet
Year ending December 31, 2015
Income statement	Company P	Company B	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	($862,000)	($366,000)	$160,000			($1,068,000)
Cost of goods sold	$515,000	$209,000	$21,000	$15,000		$570,000
				$160,000
Operating expense	$185,400	$67,000	$8,000			$260,400
Equity in income of Company B	($68,400)		$68,400			$ -
Net income	($230,000)	($90,000)
Consolidated net income						($237,600)
Share of non-controlling interest in net income					($7,600)	$7,600
Share of controlling interest in net income						($230,000)

Balance Sheet
Cash	$146,000	$98,000		$16,000		$228,000
Inventory	$255,000	$136,000		$21,000		$370,000
Investment in Company B	$450,000
Building and equipment	$964,000	$328,000	$18,000	$6,000		$1,304,000
Patented technology			$36,000	$18,000		$18,000
Total assets	$1,815,000	$562,000				$1,920,000

Liabilities	($718,000)	($71,000)	$16,000			($773,000)
Common stock	($515,000)	($150,000)				($515,000)
Retained earnings	($582,000)	($341,000)				($582,000)
Non-controlling interest in Company B						($50,000)
Total liabilities and equity	($1,815,000)	($562,000)				$1,920,000

Table: (8)

Working note:

Statement of retained earnings	Company P	Company B	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	($488,000)	($278,000)	$15,000			($488,000)
			($263,000)
Net Income	($230,000)	($90,000)				($230,000)
Dividends declared	$136,000	$27,000		$24,300	$2,700	$136,000
Retained earnings on 31/12	($582,000)	($341,000)				($582,000)

Table: (9)

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 27P

a.

To determine

Find the annual amortization resulting from the acquisition-date fair-value allocations.

a.

Expert Solution

Explanation of Solution

Particulars	Amount
Consideration paid	$ 342,000
Fair value of non-controlling interest	$ 38,000
Fair value on date of acquisition	$ 380,000
Book value of the subsidiary	$ (326,000)
Excess fair value over book value	$ 54,000
		Remaining life	Annual amortization
Building	$ 18,000	9 years	$ 2,000
Patented technology	$ 36,000	6 years	$ 6,000
Total	$ 54,000		$ 8,000

Table: (1)

b.

To determine

Identify whether the intra-entity transfers are upstream or downstream.

b.

Expert Solution

Explanation of Solution

Company B has transferred goods to Company P which implies that it is an upstream transfer because goods are transferred from the subsidiary to the parent.

c.

To determine

Find the intra-entity gross profit in inventory existed as of January 1, 2015.

c.

Expert Solution

Explanation of Solution

Computation of unrealized gross profit:

Particulars	Amount
Intra-entity gross profit percentage ($135,000 − $81,000$135,000 × 100)	40%
Inventory unsold at year end	$ 37,500
Unrealized gross profit as on January 1, 2015	$ 15,000

Table: (2)

d.

To determine

Find the intra-entity gross profit in inventory existed as of December 31, 2015.

d.

Expert Solution

Explanation of Solution

Computation of unrealized gross profit:

Particulars	Amount
Intra-entity gross profit percentage ($160,000 − $92,800$160,000 × 100)	42%
Inventory unsold at year end	$ 37,500
Unrealized gross profit as on December 31, 2015	$ 21,000

Table: (3)

e.

To determine

Find the amounts which make up the $68,400 Equity Earnings of Company B account balance for 2015.

e.

Expert Solution

Explanation of Solution

Computation of the amounts which make up the $68,400 Equity Earnings of Company B account balance for 2015:

Particulars	Amount
Reported income of Subsidiary	$ 90,000
Add: Unrealized gross profit of 2014	$ 15,000
Less: Unrealized gross profit of 2015	$ (21,000)
Less: Amortization of patented technology	$ (6,000)
Less: Excess amortization of building	$ (2,000)
Adjusted income of subsidiary	$ 76,000
Percent of ownership of controlling interest	90%
Equity in earnings of Company B	$ 68,400

Table: (4)

f.

To determine

Find the net income attributable to the non-controlling interest for 2015.

f.

Expert Solution

Explanation of Solution

Computation of the net income attributable to the non-controlling interest for 2015:

Particulars	Amount
Reported income of Subsidiary	$ 90,000
Add: Unrealized gross profit of 2014	$ 15,000
Less: Unrealized gross profit of 2015	$ (21,000)
Less: Amortization of patented technology	$ (6,000)
Less: Excess amortization of building	$ (2,000)
Adjusted income of subsidiary	$ 76,000
Percent of ownership of controlling interest	10%
Equity in earnings of Company B	$ 7,600

Table: (5)

g.

To determine

Find the amounts which make up the $450,000 Investment in Company B account balance as of December 31, 2015.

g.

Expert Solution

Explanation of Solution

Computation of the amounts which make up the $450,000 Investment in Company B account balance as of December 31, 2015:

Particulars	Amount
Investment purchased	$ 342,000
Reported net income of 2013	$ 64,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2013	$ (10,000)
Adjusted net income of year 2014	$ 46,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 41,400
Equity in earnings of Company B	$ 41,400
Share of Company P in dividends	$ (17,100)
Balance as on 31/12/2013	$ 366,300
Reported income of Company B	$ 80,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2013 recognized	$ 10,000
Deferred profit of 2014	$ (15,000)
Adjusted net income of year 2014	$ 67,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 60,300
Equity in earnings of Company B	$ 60,300
Share of Company P in dividends	$ (20,700)
Balance as on 31/12/2014	$ 405,900
Reported income of Company B	$ 90,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2014 recognized	$ 15,000
Deferred profit of 2015	$ (21,000)
Adjusted net income of year 2015	$ 76,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 68,400
Equity in earnings of Company B	$ 68,400
Share of Company P in dividends	$ (24,300)
Balance as on 31/12/2015	$ 450,000

Table: (6)

h.

To determine

Prepare the 2015 worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances.

h.

Expert Solution

Explanation of Solution

The worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances:

Entry S
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Common stock		$ 150,000
	Retained earnings on 01/01/2014		$ 263,000
	Investment in Company B			$ 371,700
	Non controlling interest			$ 41,300
	(being controlling and non-controlling interest recorded)

Table: (7)

i.

To determine

Determine the consolidation balances for these two companies.

i.

Expert Solution

Explanation of Solution

The consolidation balances for these two companies are as follows:

Company P and Company B
Consolidation Worksheet
Year ending December 31, 2015
Income statement	Company P	Company B	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	($862,000)	($366,000)	$160,000			($1,068,000)
Cost of goods sold	$515,000	$209,000	$21,000	$15,000		$570,000
				$160,000
Operating expense	$185,400	$67,000	$8,000			$260,400
Equity in income of Company B	($68,400)		$68,400			$ -
Net income	($230,000)	($90,000)
Consolidated net income						($237,600)
Share of non-controlling interest in net income					($7,600)	$7,600
Share of controlling interest in net income						($230,000)

Balance Sheet
Cash	$146,000	$98,000		$16,000		$228,000
Inventory	$255,000	$136,000		$21,000		$370,000
Investment in Company B	$450,000
Building and equipment	$964,000	$328,000	$18,000	$6,000		$1,304,000
Patented technology			$36,000	$18,000		$18,000
Total assets	$1,815,000	$562,000				$1,920,000

Liabilities	($718,000)	($71,000)	$16,000			($773,000)
Common stock	($515,000)	($150,000)				($515,000)
Retained earnings	($582,000)	($341,000)				($582,000)
Non-controlling interest in Company B						($50,000)
Total liabilities and equity	($1,815,000)	($562,000)				$1,920,000

Table: (8)

Working note:

Statement of retained earnings	Company P	Company B	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	($488,000)	($278,000)	$15,000			($488,000)
			($263,000)
Net Income	($230,000)	($90,000)				($230,000)
Dividends declared	$136,000	$27,000		$24,300	$2,700	$136,000
Retained earnings on 31/12	($582,000)	($341,000)				($582,000)

Table: (9)

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Answer 5

Chapter 5, Problem 27P

a.

To determine

Find the annual amortization resulting from the acquisition-date fair-value allocations.

a.

Expert Solution

Explanation of Solution

Particulars	Amount
Consideration paid	$ 342,000
Fair value of non-controlling interest	$ 38,000
Fair value on date of acquisition	$ 380,000
Book value of the subsidiary	$ (326,000)
Excess fair value over book value	$ 54,000
		Remaining life	Annual amortization
Building	$ 18,000	9 years	$ 2,000
Patented technology	$ 36,000	6 years	$ 6,000
Total	$ 54,000		$ 8,000

Table: (1)

b.

To determine

Identify whether the intra-entity transfers are upstream or downstream.

b.

Expert Solution

Explanation of Solution

Company B has transferred goods to Company P which implies that it is an upstream transfer because goods are transferred from the subsidiary to the parent.

c.

To determine

Find the intra-entity gross profit in inventory existed as of January 1, 2015.

c.

Expert Solution

Explanation of Solution

Computation of unrealized gross profit:

Particulars	Amount
Intra-entity gross profit percentage ($135,000 − $81,000$135,000 × 100)	40%
Inventory unsold at year end	$ 37,500
Unrealized gross profit as on January 1, 2015	$ 15,000

Table: (2)

d.

To determine

Find the intra-entity gross profit in inventory existed as of December 31, 2015.

d.

Expert Solution

Explanation of Solution

Computation of unrealized gross profit:

Particulars	Amount
Intra-entity gross profit percentage ($160,000 − $92,800$160,000 × 100)	42%
Inventory unsold at year end	$ 37,500
Unrealized gross profit as on December 31, 2015	$ 21,000

Table: (3)

e.

To determine

Find the amounts which make up the $68,400 Equity Earnings of Company B account balance for 2015.

e.

Expert Solution

Explanation of Solution

Computation of the amounts which make up the $68,400 Equity Earnings of Company B account balance for 2015:

Particulars	Amount
Reported income of Subsidiary	$ 90,000
Add: Unrealized gross profit of 2014	$ 15,000
Less: Unrealized gross profit of 2015	$ (21,000)
Less: Amortization of patented technology	$ (6,000)
Less: Excess amortization of building	$ (2,000)
Adjusted income of subsidiary	$ 76,000
Percent of ownership of controlling interest	90%
Equity in earnings of Company B	$ 68,400

Table: (4)

f.

To determine

Find the net income attributable to the non-controlling interest for 2015.

f.

Expert Solution

Explanation of Solution

Computation of the net income attributable to the non-controlling interest for 2015:

Particulars	Amount
Reported income of Subsidiary	$ 90,000
Add: Unrealized gross profit of 2014	$ 15,000
Less: Unrealized gross profit of 2015	$ (21,000)
Less: Amortization of patented technology	$ (6,000)
Less: Excess amortization of building	$ (2,000)
Adjusted income of subsidiary	$ 76,000
Percent of ownership of controlling interest	10%
Equity in earnings of Company B	$ 7,600

Table: (5)

g.

To determine

Find the amounts which make up the $450,000 Investment in Company B account balance as of December 31, 2015.

g.

Expert Solution

Explanation of Solution

Computation of the amounts which make up the $450,000 Investment in Company B account balance as of December 31, 2015:

Particulars	Amount
Investment purchased	$ 342,000
Reported net income of 2013	$ 64,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2013	$ (10,000)
Adjusted net income of year 2014	$ 46,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 41,400
Equity in earnings of Company B	$ 41,400
Share of Company P in dividends	$ (17,100)
Balance as on 31/12/2013	$ 366,300
Reported income of Company B	$ 80,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2013 recognized	$ 10,000
Deferred profit of 2014	$ (15,000)
Adjusted net income of year 2014	$ 67,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 60,300
Equity in earnings of Company B	$ 60,300
Share of Company P in dividends	$ (20,700)
Balance as on 31/12/2014	$ 405,900
Reported income of Company B	$ 90,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2014 recognized	$ 15,000
Deferred profit of 2015	$ (21,000)
Adjusted net income of year 2015	$ 76,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 68,400
Equity in earnings of Company B	$ 68,400
Share of Company P in dividends	$ (24,300)
Balance as on 31/12/2015	$ 450,000

Table: (6)

h.

To determine

Prepare the 2015 worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances.

h.

Expert Solution

Explanation of Solution

The worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances:

Entry S
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Common stock		$ 150,000
	Retained earnings on 01/01/2014		$ 263,000
	Investment in Company B			$ 371,700
	Non controlling interest			$ 41,300
	(being controlling and non-controlling interest recorded)

Table: (7)

i.

To determine

Determine the consolidation balances for these two companies.

i.

Expert Solution

Explanation of Solution

The consolidation balances for these two companies are as follows:

Company P and Company B
Consolidation Worksheet
Year ending December 31, 2015
Income statement	Company P	Company B	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	($862,000)	($366,000)	$160,000			($1,068,000)
Cost of goods sold	$515,000	$209,000	$21,000	$15,000		$570,000
				$160,000
Operating expense	$185,400	$67,000	$8,000			$260,400
Equity in income of Company B	($68,400)		$68,400			$ -
Net income	($230,000)	($90,000)
Consolidated net income						($237,600)
Share of non-controlling interest in net income					($7,600)	$7,600
Share of controlling interest in net income						($230,000)

Balance Sheet
Cash	$146,000	$98,000		$16,000		$228,000
Inventory	$255,000	$136,000		$21,000		$370,000
Investment in Company B	$450,000
Building and equipment	$964,000	$328,000	$18,000	$6,000		$1,304,000
Patented technology			$36,000	$18,000		$18,000
Total assets	$1,815,000	$562,000				$1,920,000

Liabilities	($718,000)	($71,000)	$16,000			($773,000)
Common stock	($515,000)	($150,000)				($515,000)
Retained earnings	($582,000)	($341,000)				($582,000)
Non-controlling interest in Company B						($50,000)
Total liabilities and equity	($1,815,000)	($562,000)				$1,920,000

Table: (8)

Working note:

Statement of retained earnings	Company P	Company B	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	($488,000)	($278,000)	$15,000			($488,000)
			($263,000)
Net Income	($230,000)	($90,000)				($230,000)
Dividends declared	$136,000	$27,000		$24,300	$2,700	$136,000
Retained earnings on 31/12	($582,000)	($341,000)				($582,000)

Table: (9)

Answer 6

Chapter 5, Problem 27P

a.

To determine

Find the annual amortization resulting from the acquisition-date fair-value allocations.

a.

Expert Solution

Explanation of Solution

Particulars	Amount
Consideration paid	$ 342,000
Fair value of non-controlling interest	$ 38,000
Fair value on date of acquisition	$ 380,000
Book value of the subsidiary	$ (326,000)
Excess fair value over book value	$ 54,000
		Remaining life	Annual amortization
Building	$ 18,000	9 years	$ 2,000
Patented technology	$ 36,000	6 years	$ 6,000
Total	$ 54,000		$ 8,000

Table: (1)

Answer 7

Chapter 5, Problem 27P

a.

To determine

Find the annual amortization resulting from the acquisition-date fair-value allocations.

Answer 8

a.

Expert Solution

Explanation of Solution

Particulars	Amount
Consideration paid	$ 342,000
Fair value of non-controlling interest	$ 38,000
Fair value on date of acquisition	$ 380,000
Book value of the subsidiary	$ (326,000)
Excess fair value over book value	$ 54,000
		Remaining life	Annual amortization
Building	$ 18,000	9 years	$ 2,000
Patented technology	$ 36,000	6 years	$ 6,000
Total	$ 54,000		$ 8,000

Table: (1)

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

b.

To determine

Identify whether the intra-entity transfers are upstream or downstream.

b.

Expert Solution

Explanation of Solution

Company B has transferred goods to Company P which implies that it is an upstream transfer because goods are transferred from the subsidiary to the parent.

Answer 13

b.

To determine

Identify whether the intra-entity transfers are upstream or downstream.

Answer 14

b.

Expert Solution

Explanation of Solution

Company B has transferred goods to Company P which implies that it is an upstream transfer because goods are transferred from the subsidiary to the parent.

Answer 15

b.

Expert Solution

Answer 16

b.

Expert Solution

Answer 17

Expert Solution

Answer 18

c.

To determine

Find the intra-entity gross profit in inventory existed as of January 1, 2015.

c.

Expert Solution

Explanation of Solution

Computation of unrealized gross profit:

Particulars	Amount
Intra-entity gross profit percentage ($135,000 − $81,000$135,000 × 100)	40%
Inventory unsold at year end	$ 37,500
Unrealized gross profit as on January 1, 2015	$ 15,000

Table: (2)

Answer 19

c.

To determine

Find the intra-entity gross profit in inventory existed as of January 1, 2015.

Answer 20

c.

Expert Solution

Explanation of Solution

Computation of unrealized gross profit:

Particulars	Amount
Intra-entity gross profit percentage ($135,000 − $81,000$135,000 × 100)	40%
Inventory unsold at year end	$ 37,500
Unrealized gross profit as on January 1, 2015	$ 15,000

Table: (2)

Answer 21

c.

Expert Solution

Answer 22

c.

Expert Solution

Answer 23

Expert Solution

Answer 24

d.

To determine

Find the intra-entity gross profit in inventory existed as of December 31, 2015.

d.

Expert Solution

Explanation of Solution

Computation of unrealized gross profit:

Particulars	Amount
Intra-entity gross profit percentage ($160,000 − $92,800$160,000 × 100)	42%
Inventory unsold at year end	$ 37,500
Unrealized gross profit as on December 31, 2015	$ 21,000

Table: (3)

Answer 25

d.

To determine

Find the intra-entity gross profit in inventory existed as of December 31, 2015.

Answer 26

d.

Expert Solution

Explanation of Solution

Computation of unrealized gross profit:

Particulars	Amount
Intra-entity gross profit percentage ($160,000 − $92,800$160,000 × 100)	42%
Inventory unsold at year end	$ 37,500
Unrealized gross profit as on December 31, 2015	$ 21,000

Table: (3)

Answer 27

d.

Expert Solution

Answer 28

d.

Expert Solution

Answer 29

Expert Solution

Answer 30

e.

To determine

Find the amounts which make up the $68,400 Equity Earnings of Company B account balance for 2015.

e.

Expert Solution

Explanation of Solution

Computation of the amounts which make up the $68,400 Equity Earnings of Company B account balance for 2015:

Particulars	Amount
Reported income of Subsidiary	$ 90,000
Add: Unrealized gross profit of 2014	$ 15,000
Less: Unrealized gross profit of 2015	$ (21,000)
Less: Amortization of patented technology	$ (6,000)
Less: Excess amortization of building	$ (2,000)
Adjusted income of subsidiary	$ 76,000
Percent of ownership of controlling interest	90%
Equity in earnings of Company B	$ 68,400

Table: (4)

Answer 31

e.

To determine

Find the amounts which make up the $68,400 Equity Earnings of Company B account balance for 2015.

Answer 32

e.

Expert Solution

Explanation of Solution

Computation of the amounts which make up the $68,400 Equity Earnings of Company B account balance for 2015:

Particulars	Amount
Reported income of Subsidiary	$ 90,000
Add: Unrealized gross profit of 2014	$ 15,000
Less: Unrealized gross profit of 2015	$ (21,000)
Less: Amortization of patented technology	$ (6,000)
Less: Excess amortization of building	$ (2,000)
Adjusted income of subsidiary	$ 76,000
Percent of ownership of controlling interest	90%
Equity in earnings of Company B	$ 68,400

Table: (4)

Answer 33

e.

Expert Solution

Answer 34

e.

Expert Solution

Answer 35

Expert Solution

Answer 36

f.

To determine

Find the net income attributable to the non-controlling interest for 2015.

f.

Expert Solution

Explanation of Solution

Computation of the net income attributable to the non-controlling interest for 2015:

Particulars	Amount
Reported income of Subsidiary	$ 90,000
Add: Unrealized gross profit of 2014	$ 15,000
Less: Unrealized gross profit of 2015	$ (21,000)
Less: Amortization of patented technology	$ (6,000)
Less: Excess amortization of building	$ (2,000)
Adjusted income of subsidiary	$ 76,000
Percent of ownership of controlling interest	10%
Equity in earnings of Company B	$ 7,600

Table: (5)

Answer 37

f.

To determine

Find the net income attributable to the non-controlling interest for 2015.

Answer 38

f.

Expert Solution

Explanation of Solution

Computation of the net income attributable to the non-controlling interest for 2015:

Particulars	Amount
Reported income of Subsidiary	$ 90,000
Add: Unrealized gross profit of 2014	$ 15,000
Less: Unrealized gross profit of 2015	$ (21,000)
Less: Amortization of patented technology	$ (6,000)
Less: Excess amortization of building	$ (2,000)
Adjusted income of subsidiary	$ 76,000
Percent of ownership of controlling interest	10%
Equity in earnings of Company B	$ 7,600

Table: (5)

Answer 39

f.

Expert Solution

Answer 40

f.

Expert Solution

Answer 41

Expert Solution

Answer 42

g.

To determine

Find the amounts which make up the $450,000 Investment in Company B account balance as of December 31, 2015.

g.

Expert Solution

Explanation of Solution

Computation of the amounts which make up the $450,000 Investment in Company B account balance as of December 31, 2015:

Particulars	Amount
Investment purchased	$ 342,000
Reported net income of 2013	$ 64,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2013	$ (10,000)
Adjusted net income of year 2014	$ 46,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 41,400
Equity in earnings of Company B	$ 41,400
Share of Company P in dividends	$ (17,100)
Balance as on 31/12/2013	$ 366,300
Reported income of Company B	$ 80,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2013 recognized	$ 10,000
Deferred profit of 2014	$ (15,000)
Adjusted net income of year 2014	$ 67,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 60,300
Equity in earnings of Company B	$ 60,300
Share of Company P in dividends	$ (20,700)
Balance as on 31/12/2014	$ 405,900
Reported income of Company B	$ 90,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2014 recognized	$ 15,000
Deferred profit of 2015	$ (21,000)
Adjusted net income of year 2015	$ 76,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 68,400
Equity in earnings of Company B	$ 68,400
Share of Company P in dividends	$ (24,300)
Balance as on 31/12/2015	$ 450,000

Table: (6)

Answer 43

g.

To determine

Find the amounts which make up the $450,000 Investment in Company B account balance as of December 31, 2015.

Answer 44

g.

Expert Solution

Explanation of Solution

Computation of the amounts which make up the $450,000 Investment in Company B account balance as of December 31, 2015:

Particulars	Amount
Investment purchased	$ 342,000
Reported net income of 2013	$ 64,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2013	$ (10,000)
Adjusted net income of year 2014	$ 46,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 41,400
Equity in earnings of Company B	$ 41,400
Share of Company P in dividends	$ (17,100)
Balance as on 31/12/2013	$ 366,300
Reported income of Company B	$ 80,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2013 recognized	$ 10,000
Deferred profit of 2014	$ (15,000)
Adjusted net income of year 2014	$ 67,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 60,300
Equity in earnings of Company B	$ 60,300
Share of Company P in dividends	$ (20,700)
Balance as on 31/12/2014	$ 405,900
Reported income of Company B	$ 90,000
Less: Amortization of patented technology	$ (6,000)
Add: Excess depreciation of building	$ (2,000)
Deferred profit of 2014 recognized	$ 15,000
Deferred profit of 2015	$ (21,000)
Adjusted net income of year 2015	$ 76,000
Percent of ownership of controlling interest	90%
Net income attributable to controlling interest	$ 68,400
Equity in earnings of Company B	$ 68,400
Share of Company P in dividends	$ (24,300)
Balance as on 31/12/2015	$ 450,000

Table: (6)

Answer 45

g.

Expert Solution

Answer 46

g.

Expert Solution

Answer 47

Expert Solution

Answer 48

h.

To determine

Prepare the 2015 worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances.

h.

Expert Solution

Explanation of Solution

The worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances:

Entry S
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Common stock		$ 150,000
	Retained earnings on 01/01/2014		$ 263,000
	Investment in Company B			$ 371,700
	Non controlling interest			$ 41,300
	(being controlling and non-controlling interest recorded)

Table: (7)

Answer 49

h.

To determine

Prepare the 2015 worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances.

Answer 50

h.

Expert Solution

Explanation of Solution

The worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances:

Entry S
Date	Accounts Title and Explanation	Post Ref.	Debit	Credit
	Common stock		$ 150,000
	Retained earnings on 01/01/2014		$ 263,000
	Investment in Company B			$ 371,700
	Non controlling interest			$ 41,300
	(being controlling and non-controlling interest recorded)

Table: (7)

Answer 51

h.

Expert Solution

Answer 52

h.

Expert Solution

Answer 53

Expert Solution

Answer 54

i.

To determine

Determine the consolidation balances for these two companies.

i.

Expert Solution

Explanation of Solution

The consolidation balances for these two companies are as follows:

Company P and Company B
Consolidation Worksheet
Year ending December 31, 2015
Income statement	Company P	Company B	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	($862,000)	($366,000)	$160,000			($1,068,000)
Cost of goods sold	$515,000	$209,000	$21,000	$15,000		$570,000
				$160,000
Operating expense	$185,400	$67,000	$8,000			$260,400
Equity in income of Company B	($68,400)		$68,400			$ -
Net income	($230,000)	($90,000)
Consolidated net income						($237,600)
Share of non-controlling interest in net income					($7,600)	$7,600
Share of controlling interest in net income						($230,000)

Balance Sheet
Cash	$146,000	$98,000		$16,000		$228,000
Inventory	$255,000	$136,000		$21,000		$370,000
Investment in Company B	$450,000
Building and equipment	$964,000	$328,000	$18,000	$6,000		$1,304,000
Patented technology			$36,000	$18,000		$18,000
Total assets	$1,815,000	$562,000				$1,920,000

Liabilities	($718,000)	($71,000)	$16,000			($773,000)
Common stock	($515,000)	($150,000)				($515,000)
Retained earnings	($582,000)	($341,000)				($582,000)
Non-controlling interest in Company B						($50,000)
Total liabilities and equity	($1,815,000)	($562,000)				$1,920,000

Table: (8)

Working note:

Statement of retained earnings	Company P	Company B	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	($488,000)	($278,000)	$15,000			($488,000)
			($263,000)
Net Income	($230,000)	($90,000)				($230,000)
Dividends declared	$136,000	$27,000		$24,300	$2,700	$136,000
Retained earnings on 31/12	($582,000)	($341,000)				($582,000)

Table: (9)

Answer 55

i.

To determine

Determine the consolidation balances for these two companies.

Answer 56

i.

Expert Solution

Explanation of Solution

The consolidation balances for these two companies are as follows:

Company P and Company B
Consolidation Worksheet
Year ending December 31, 2015
Income statement	Company P	Company B	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	($862,000)	($366,000)	$160,000			($1,068,000)
Cost of goods sold	$515,000	$209,000	$21,000	$15,000		$570,000
				$160,000
Operating expense	$185,400	$67,000	$8,000			$260,400
Equity in income of Company B	($68,400)		$68,400			$ -
Net income	($230,000)	($90,000)
Consolidated net income						($237,600)
Share of non-controlling interest in net income					($7,600)	$7,600
Share of controlling interest in net income						($230,000)

Balance Sheet
Cash	$146,000	$98,000		$16,000		$228,000
Inventory	$255,000	$136,000		$21,000		$370,000
Investment in Company B	$450,000
Building and equipment	$964,000	$328,000	$18,000	$6,000		$1,304,000
Patented technology			$36,000	$18,000		$18,000
Total assets	$1,815,000	$562,000				$1,920,000

Liabilities	($718,000)	($71,000)	$16,000			($773,000)
Common stock	($515,000)	($150,000)				($515,000)
Retained earnings	($582,000)	($341,000)				($582,000)
Non-controlling interest in Company B						($50,000)
Total liabilities and equity	($1,815,000)	($562,000)				$1,920,000

Table: (8)

Working note:

Statement of retained earnings	Company P	Company B	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	($488,000)	($278,000)	$15,000			($488,000)
			($263,000)
Net Income	($230,000)	($90,000)				($230,000)
Dividends declared	$136,000	$27,000		$24,300	$2,700	$136,000
Retained earnings on 31/12	($582,000)	($341,000)				($582,000)