Question

Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2016, in exchange for $423,000 in cash. The subsidiary's stockholders' equity accounts totaled $407,000 and the noncontrolling interest had a fair value of $47,000 on that day. However, a building (with a ten-year remaining life) in Brey's accounting records was undervalued by $31,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (four-year remaining life).

Brey reported net income from its own operations of $73,000 in 2016 and $89,000 in 2017. Brey declared dividends of $23,500 in 2016 and $27,500 in 2017.

Year	Cost to Brey			Transfer Price to Pitino			Inventory Remaining at Year-End (at transfer price)
2016	$	78,000		$	160,000		$	34,000
2017		90,000			180,000			46,500
2018		123,000			205,000			40,000

At December 31, 2018, Pitino owes Brey $25,000 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.

Note: Parentheses indicate a credit balance.

	Pitino				Brey
Sales revenues	$	(880,000	)		$	(411,000	)
Cost of goods sold		524,000				218,000
Expenses		186,300				76,000
Equity in earnings of Brey		(101,835	)			0
Net income	$	(271,535	)		$	(117,000	)
Retained earnings, 1/1/18	$	(506,000	)		$	(296,000	)
Net income (above)		(271,535	)			(117,000	)
Dividends declared		138,000				28,000
Retained earnings, 12/31/18	$	(639,535	)		$	(385,000	)
Cash and receivables	$	155,000			$	107,000
Inventory		300,000				181,000
Investment in Brey		558,630				0
Land, buildings, and equipment (net)		973,000				337,000
Total assets	$	1,986,630			$	625,000
Liabilities	$	(787,095	)		$	(18,000	)
Common stock		(560,000	)			(222,000	)
Retained earnings, 12/31/18		(639,535	)			(385,000	)
Total liabilities and equity	$	(1,986,630	)		$	(625,000	)

1. Without preparing a worksheet or consolidation entries, determine the consolidation balances for these two companies.

$ $ $ Sales revenues Cost of goods sold Expenses Equity in earnings of Brey Noncontrolling interest in consolidated net income Consolidated net income to parent Retained earnings, 1/1 Dividends declared Retained earnings, 12/31 Cash and receivables Inventory Investment in Brey Land, buildings, and equipment Patented technology Total Assets Liabilities Noncontrolling interest in Brey, 12/31 Common Stock Retained earnings, 12/31 Total liabilities and stockholders' equity $ $ $ $ $ $ $ $ $ Balance 1,496,000 529,750 273,400 0 11,315 692,850 506,000 138,000 639,000 237,000 465,000 00 1,331,700 32,000 Ⓡ 2,065,700 780,095 86,070 560,000 639,535 2,065,700 $ $ $ $ $ $

correct and explain where the balance came from please

Answer 1

is (0) Computation of Annual Amortization ou follow : Amount Particulars 12,3000 Consideration which is paid in loch 7 & 4 The Book value of Stockholder's Equity 407000 Un des valued building 31,000 -83+B Faim value of Stockholder's Equity Exers of faint Value over the Book!- Bs-B2 Book value (Gross) of - Bb - Remaining useful life in years Depreciation per yeah B6lsing B7B8 Result of above table is as follows: Dame Amount Particulars $ 4,3,000 Consideration which is paid in cosh 3 $4,07,000 $ 31,000 $ 4,38,000 5 6 Book value of stock hower's Equity undervalued Building Fan value of stockholder'e Equity Exccre of Pain value over the Book Value of Grose) Gross Remaining bieful life in years | Depreciation Pen year $ 15,000 $ 15,000 7 $3,750

Hence, The Amount of Deprevation Per year is $3,750.

-6) The intra - Entity transfers Ciren in the Question are exhausting transaction because the goods have been sold by the subsidiary company to the Deprecation Company. (0) Computation of inbra - Entity ghoge profit or on January 1, 2018 is ou follows, Amount 90000 10 11 19 13 180000 Particulars cost to Buey Touane Care Tuansfer Price to Pitino / Transferred logas on Tanuary 01, 2018 Cost of transferred log Intra-entity gross Profit 46500 - B13*(B1/B12) 15 -B13 - B14

The Result of the Table is au follows Particulars Amount Cost to Brey Tuanfen Price to Pitino $90,000 $ 1,80,000 Transferred log ou on January Ol $46,500 2018 $ 23,950 cost of Transferred log Intra-Enbiby gross Profit $231850

1 (d) Computation of Intra - Entity Grosse Profit a on December 31, 2018 is as follows: Amount 16 Pagbiwlars 17 193000 cost to Brey Toma Te Tuansfer Price to Pitino 205000 19 Transferred inventory as on H0000 December 31, 2018 1 201 cost of transferred inventory - B19*(B17/B18- Intra - Entity Cross Profit - B19-B20 The Result of above Table is as follows: Amount Particulars $1,23,00 Cost to Brey Tranfer Price to Pitino $ 9,05,000 Transferred Invenbory as on $ 40,000 December 31, 2018 Cost of transferred inventory $ 24,000 Intra-Envity gross profit | $16,000