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Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2017, for $428,000

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a).

Consolidated Cost of Goods Sold

      Protrade’s cost of goods sold ............................................................         $320,000

      Seacraft’s cost of goods sold .............................................................           227,000

      Elimination of 2018 intra-entity transfers..........................................         (116,000)

      Realized gross profit deferred in 2017

      (2018 beginning inventory)

               $34,000 transfer price ÷ 1.6 = $21,250 cost

               $34,000 – $21,250 = $12,750 unrealized gross profit................           (12,750)

      Deferral of 2018 unrealized gross profit

      in ending inventory:

               $48,000 transfer price ÷ 1.6 = $30,000 cost

               $48,000 – $30,000 = $18,000 unrealized gross profit................             18,000

      Consolidated cost of goods sold .......................................................         $436,250

      Consolidated Inventory

            Protrade book value .......................................................................         $352,000

            Seacraft book value ........................................................................           116,000

            Defer ending unrealized gross profit (see above) ......................           (18,000)

            Consolidated Inventory .................................................................         $450,000

     

b)

Consolidated Cost of Goods Sold

        Protrade book value .............................................................................         $320,000

      Seacraft book value ..............................................................................           227,000

      Elimination of 2018 intra-entity transfers ..........................................         (86,000)

      Realized gross profit deferred in 2017

      (2018 beginning inventory)

            $27,000 transfer price ÷ 1.6 = $16875 cost

            $27,000 – $16875 = $10,125 unrealized gross profit ..................           (10,125)

      Deferral of 2018 unrealized gross profit

      in ending inventory:

            $41,000 transfer price ÷ 1.6 = $25,625 cost

            $41,000 – $25,625 = $15375 unrealized gross profit ..................            15375

      Consolidated cost of goods sold .......................................................         $466,250

      Consolidated inventory

      Protrade book value .............................................................................         $352,000

      Seacraft book value ..............................................................................           116,000

      Defer ending unrealized gross profit (see above) ............................           (15,375)

      Consolidated inventory .......................................................................         $452,625

      Net income attributable to noncontrolling interest

      Seacraft reported net income .............................................................         $82,000

      2017 unrealized gross profit realized in 2018 (above) .....................            10,125

      2018 unrealized gross profit deferred until 2019 (above) ................           (15,375)

      Seacraft realized net income ...............................................................         $76,750

      Outside ownership percentage ..........................................................               20%

      Net income attributable to noncontrolling interest...........................         $ 15,350

c).

   Consolidated buildings (net):

      Protrade’s buildings .........................................................                             $364,000

      Seacraft's buildings ........................................................                                163,000

      Remove write-up created by transfer

            ($92,000 – $56,000) ...................................................        $(36,000)

      Remove excess depreciation created by transfer

            ($36,000 unrealized gain ÷ 5-year

            remaining life × 2 years) ..........................................          14,400          (21,600)

      Consolidated buildings (net) ..........................................                              $505,400

      Consolidated expenses:

      Protrade’s book value .....................................................                             $156,000

      Seacraft's book value ......................................................                                111,000

     Remove excess depreciation on transferred building

            ($36,000 unrealized gain ÷ 5 year remaining life)....        (7200)

      Consolidated expenses ..................................................                              $259,800

_____________________________________________

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