Question

Peat Company owns a 90% interest in Seaton Company. The consolidated income statement drafted by the controller of Peat Company appeared as follows:

Peat Company and Subsidiary Consolidated Income Statement for Year Ended December 31, 2015
Sales				$14,098,400
Cost of Sales		9,191,200
Operating Expense		1,784,000		10,975,200
Consolidated Income				3,123,200
Less Noncontrolling Interest in Consolidated Income				212,320
Controlling Interest in Consolidated Net Income				$2,910,880

During your audit you discover that intercompany sales transactions were not reflected in the controller’s draft of the consolidated income statement. Information relating to intercompany sales and unrealized intercompany profit is as follows:

		Cost		Selling Price		Unsold at Year-End
2014 Sales—Seaton to Peat		$1,487,100		$1,789,800		1/3
2015 Sales—Peat to Seaton		899,000		1,390,600		2/5

Prepare a corrected consolidated income statement for Peat Company and Seaton Company for the year ended December 31, 2015.

Prepare a corrected consolidated income statement for Peat Company and Seaton Company for the year ended December 31, 2015.

Prepare a corrected consolidated income statement for Peat Company and Seaton Company for the year ended December 31, 2015 PEAT COMPANY AND SUBSIDIARY Consolidated Income Statement For the Year Ended December 31, 2015

The Options are : Consolidated Income, Controlling Interest in Consolidated Net Income,Cost of Goods Sold, Noncontrolling Interest in Consolidated Income, Operating Expense, Sales

Answer 1

PEAT COMPANY AND SUBSIDIARY
Consolidated Income Statement
For the Year ended December 31, 2015
Particulars	Amount ($)	Amount ($)
Sales (14098400-1390600)		12707800
Less: Cost of Good sold	7896340
Less: Operating expenses	1784000
		9680340
Consolidated Income		3027460
Less: Non controlling interest in consolidated income		222410
Controlling interest in consolidated net income		2805050
Note:
Calculation of cost of good sold	Amount ($)	Amount ($)
Reported cost of good sold		9191200
Less: Inter company sales in 2015		-1390600
Add: unrealized Profit in ending inventory	(1390600-899000)*2/5	196640
Less: Realized profit in beginning inventory	(1789800-1487100)*1/3	-100900
Corrected cost of good sold		7896340
Calculation of Non controlling interest in consolidated income	Amount ($)	Amount ($)
Reported net income of subsidiary		2123200
Add: Unrealized profit on subsidiary sales in 2014 that is	(1789800-1487100)*1/3	100900
considered realized in 2015
Less: Unrealized profit on subsidiary sales in 2015		0
Non controlling interest in consolidated income	(2123200+100900)*.1	222410