Ques 1

Retained Earnings $ 1,500

Cost of goods sold $ 1,500

Equipment $ 14,500
Investment in Sledge $ 7,440
Accumulated depreciation $ 21,940

Common stock $ 330,000

Retained earnings $ 468,500
Investment in Sledge $ 718,650
Noncontrolling interest in sledge $ 79,850

Contracts(84000-(84000/20* 2 years) $ 72,900

Buildings(44000-(44000/10* 2 years) $ 32,800
Investment in Sledge $ 95,130
Noncontrolling interest in Sledge $ 10,570

Equity income in Sledge $ 82,095

Investment in Sledge $ 82,095

Depreciation expense $ 4,100

Amortization expense $ 4,050
Contracts $ 4,050
Buildings $ 4,100

Sales $ 41,000
Cost of goods sold $ 41,000

Cost of goods sold $ 8,200

Inventory $ 8,200

Accumulated depreciation $ 1,860

Depreciation expense $ 1,860

Ques 2
Revenues $ 340,000
Cost of goods sold $ (175,000)
Other expenses $ (61,000)
Excess acquisition-date fair value amortization $ (8,150)
Net income adjusted for amortization $ 95,850
Gross profit on 2017 upstream inventory transfer recognized in 2018 (Entry *G) $ 1,500
Gross profit on 2018 upstream inventory transfer deferred until 2019 (Entry G) $ (8,200)
Adjusted net income of subsidiary—2018 $ 89,150
Outside ownership 10.00%
Net income attributable to noncontrolling interest $ 8,915
a.
Entry *G
To remove intra entity gross profit beginning account balance 1500
5000*0.3

b.
Entry *TA
To adjust the equipment balance to original cost 37000
and to adjust accumulated depriciation to the consolidated 1860
January 1 2018 balance

Gain on sale 9300

Extra depricaiton 1860

7440

Entry S
to eliminate subsidiary's stockholder's equirt accounts and recognise NCI

Entry A
To recognise acquistion date fair value allocations adjusted for 2 years of
amortization(2016 & 2017)

Entry I
Subsidiary reported net income 104000
Recognize upstream intra-entity gross profit in beg. inventory
Intra-entity inventory year-end 2017 (upstream) 5000
Gross profit rate 30%
Intra-entity gross profit in 2018 beginning inventory 1500
Defer upstream intra-entity gross profit in ending inventory
Intra-entity inventory year-end 2018 (upstream) 20500
Gross profit rate 40%
Intra-entity gross profit in 2018 ending inventory -8200
Excess amortization -8150
2018 adjusted subsidiary net income 89150
Parent’s ownership percentage 90%
Parent’s share of subsidiary adjusted net income 80235
Depreciation adjustment from 2017 downstream fixed asset sale 1860

Parent’s recorded 2018 equity income from subsidiary 82095

Entry E
DEPRICIAITON:
81000/20 years 4050
41000/10 years 4100
8150
Entry TI
Eliminate intra entity inventory transffers

Entry G
To remove gross prpfit from ending account balance 8200