Question

Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2017, for $412,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft's identifiable assets and liabilities at a collective net fair value of $545,000 and the fair value of the 20 percent noncontrolling interest was $103,000. No excess fair value over book value amortization accompanied the acquisition. The following selected account balances are from the individual financial records of these two companies as of December 31, 2018: Sales Cost of goods sold Operating expenses Retained earnings, 1/1/18 Inventory Buildings (net) Investment income Protrade Seacraft $ 660,000 $ 380,000 300,000 207,000 152,000 107,000 760,000 200,000 348,000 112,000 360,000 159,000 Not given

Answer 1

B Amount A 1 A 2 Particulars 3 COGS 4 Protrade's cost of goodssold 5 Seacraft's cost of goodssold 6 Elimination of 2018 intra-entity transfers 7 Decrease in opening Inventory due to 2017 unrealized profit 8 Reduction of Closing inventory due to 2018 unrealized Profit 9 Consolidated costof goods sold 10 11 Consolidated inventory 12 Protrade book value 13 Seacraft book value 14 Defer ending unrealized gross profit 15 Consolidated inventory 300000 207000 - 112000 -112501 16500 400250 348000 112000 - 16500 443500 16 17 Noncontrolling interest (Net Income) 18 sales 19 less: cost of goods sold 20 Less: operating expenses 21 net income 22 owership 23 Noncontrolling interest (Net Income) 24 25 26 COGS 27 Inventory 28 Noncontrolling interest (Net Income) 380000 207000 1070001 66000 20% 13200 400250 443500 13200 20

Amount 300000 207000 - 112000 -11250 16500 =SUM(B4:B8) 1 A 2 Particulars 3 COGS 4 Protrade's cost of goodssold 5 Seacraft's cost of goodssold 6 Elimination of 2018 intra-entity transfers 7 Decrease in opening Inventory due to 2017 unrealized grossprofit 8 Reduction of endinginventory because of2018 unrealized Profit 9 Consolidated costof goods sold 10 11 Consolidated inventory 12 Protrade book value 13 Seacraft book value 14 Defer ending unrealized gross profit 15 Consolidated inventory 16 17 Noncontrolling interest (Net Income) 18 sales 19 less: cost of goods sold 20 Less: operating expenses 21 net income 22 owership 23 Noncontrolling interest (Net Income) 24 25 26 COGS 27 Inventory 28 Noncontrolling interest (Net Income) 29 348000 112000 - 16500 =SUM(B12:B14) 380000 207000 107000 =+B18-B19-B20 0.2 =+B21*B22 400250 443500 13200

B A 1 B 2 COGS 3 Protrade's COGS 4 Seacraft's COGS 5 Elimination of 2018 intra-entity transfers 6 Decrease in opening Inventory due to 2017 unrealized profit 7 Reduction of Closing inventory due to 2018 unrealized Profit 8 Consolidated costof goods sold 300000 207000 -82000 -8625 13875 430250 9 348000 112000 -13875 446125 10 11 Consolidated inventory 12 Protrade book value 13 Seacraft book value 14 Defer ending unrealized gross profit 15 Consolidated inventory 16 17 Noncontrolling interest (Net Income) 18 sales 19 less: cost of goods sold 20 Less: operating expenses 21 net income 22 unrealized profit( prior year) 23 unrealized profit (current year) 24 25 owership 26 Noncontrolling interest (Net Income) 27 28 cost of goods sold 29 inventory 30 Noncontrolling interest (Net Income) 380000 -207000 -107000 66000 8625 -13875 60750 20% 12150 430250 446125 12150 31 32

в 1 B 2 COGS 3 Protrade's COGS 300000 4 Seacraft's COGS 207000 5 Elimination of 2018 intra-entity transfers -82000 6 Decrease in opening Inventory due to 2017 unrealized profit |-8625 7 Reduction of Closing inventory due to 2018 unrealized Profit (13875 8 Consolidated costof goods sold =SUM(B3:37) 9 348000 112000 -13875 =SUM(B12:B14) 10 11 Consolidated inventory 12 Protrade book value 13 Seacraft book value 14 Defer ending unrealized gross profit 15 Consolidated inventory 16 17 Noncontrolling interest (Net Income) 18 sales 19 less: cost of goods sold 20 Less: operating expenses 21 net income 22 unrealized profit( prior year) 23 unrealized profit (current year) 24 25 owership 26 Noncontrolling interest (Net Income) 27 28 cost of goods sold 29 inventory 30 Noncontrolling interest (Net Income) 31 380000 -207000 - 107000 =SUM(B18:B20) 8625 -13875 =SUM(B21:B23) 0.2 =+B24*B25 =+B8 =B15 =B26

70 C 71 72 consolidated buildings 73 360000 159000 -32000 104001 497400 152000 107000 -6400 252600 74 Protrade's builing 75 Seacraft's building 76 From transfer 77 Used 78 consolidated buildings 79 80 consolidated operatinge expenses 81 Protrade operating expense 82 Seacraft operating expense 83 Less: annual depreciaiton 84 Consolidated inventory 85 86 Noncontrolling interest (Net Income) 87 sales 88 less: cost of goods sold 89 Less: operating expenses 90 net income 91 owership 92 Noncontrolling interest (Net Income) 93 94 Total buildings 95 Total Operatinge expenses 96 Noncontrolling interest (Net Income) 3800001 -207000 -107000 66000 20% 13200 497400 252600 13200

70 C 72 consolidated buildings 73 74 Protrade's builing 75 Seacraft's building 76 From transfer 77 Used 78 consolidated buildings 360000 159000 -32000 10400 =SUM(B74:B77) 79 152000 107000 -6400 =SUM(B81:B83) 80 consolidated operatinge expenses 81 Protrade operating expense 82 Seacraft operating expense 83 Less: annual depreciaiton 84 Consolidated inventory 85 86 Noncontrolling interest (Net Income) 87 sales 88 less: cost of goods sold 89 Less: operating expenses 90 net income 91 owership 92 Noncontrolling interest (Net Income) 380000 -207000 - 107000 =SUM(B87:389) 0.2 =+B90*B91 93 94 Total buildings 95 Total Operatinge expenses 96 Noncontrolling interest (Net Income) 497400 252600 13200 97