ANSWER
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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