Question

Please help me solve this.

Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2014, for $484,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft's identifiable assets and liabilities at a collective net fair value of $725,000 and the fair value of the 20 percent noncontrolling interest was $121,000. 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, 2015: Protrade Sales Cost of goods sold Operating expenses Retained earnings, 1/1/15 Inventory Buildings (net) Investment income Seacraft $ 840,000 $560,000 297,000 125,000 940,000 380,000 130,000 177,000 390,000 170,000 366,000 378,000 Not given Each of the following problems is an independent situation: a. Assume that Protrade sells Seacraft inventory at a markup equal to 60 percent of cost. Intra-entity transfers were $110,000 in 2014 and $130,000 in 2015. Of this inventory, Seacraft retained and then sold $48,000 of the 2014 transfers in 2015 and held $62,000 of the 2015 transfers until 2016 Determine balances for the following items that would appear on consolidated financial statements for 2015 Cost of goods sold Inventory Net income attributable to noncontrolling interest b. Assume that Seacraft sells inventory to Protrade at a markup equal to 60 percent of cost. Intra-entity transfers were $70,000 in 2014 and $100,000 in 2015. Of this inventory, $41,000 of the 2014 transfers were retained and then sold by Protrade in 2015, whereas $55,000 of the 2015 transfers were held until 2016 Determine balances for the following items that would appear on consolidated financial statements for 2015 Cost of goods sold Inventory Net income attributable to noncontrolling interest c. Protrade sells Seacraft a building on January 1, 2014, for $120,000, although its book value was only 70,000 on this date. The building had a five-year remaining life and was to be depreciated using the straight-line method with no salvage value Determine balances for the following items that would appear on consolidated financial statements for 2015: Buildings (net) Operating expenses Net income attributable to noncontrolling interest

Answer 1

Gross Profit Rate	markup/(1+Markup)
	0.6/(1+0.6)
	0.375
a.
Intra Entity Transfer in 2015	130000
Beginning unrealized Gross Profit	Beginning inventory of 2015*gross profit rate
	48000*0.375
	18000
ending unrealized Gross Profit	ending inventory of 2015*gross profit rate
	62000*0.375
	23250
Consolidated Cost of Goods Sold	390000+297000-130000-18000+23250
	562250
Inventory	366000+130000-23250
	472750
Net Income Attributable to Non Controlling Interest	(Sales-Cost of Goods Sold-Operating Exp)*20% Non Controlling Interest
	(560000-297000-125000)*20%
	27600
(Since Sales are made downstream (by Parent to Subs), deferrals will nto impact and hence 52600 is Net income attributalble to Non Controllint Interest.
b.
Intra Entity Transfer in 2015	100000
Beginning unrealized Gross Profit	Beginning inventory of 2015*gross profit rate
	41000*0.375
	15375
ending unrealized Gross Profit	ending inventory of 2015*gross profit rate
	55000*0.375
	20625
Consolidated Cost of Goods Sold:	390000+297000-100000-15375+20625
	592250
Inventory	366000+130000-20625
	475375
Net Income Attributable to Non Controlling Interest
since sale is upstream, deferal impact should be taken:
Seacraft Reported Net Income (560000-297000-125000)	138000
2014 unrealized Gross Profit, realized in 2015	15375
2015 unrealized Gross Profit, realized in 2016	-20625
Seacraft Realized Net Income	132750
Non Controlling Interest	20%
Net Income Attributable to Non Controlling Interest	26550
c.
Building-Protrade	378000
Building-Seacraft	177000
Gain from transfer 120000-70000	-50000
Excess Dep from transfer 50000/5*2 year	20000
Consolidated Building Net	525000
Book Value Operating Exp-Protrade	170000
Book Value Operating Exp-Sseacraft	125000
Excess Depreciation 50000/5	-10000
Consolidated Expenses	285000
Since transfer is downstream, no impact on non controlling interest
Net Income Attributable to Non Controlling Interest	(Sales-Cost of Goods Sold)*20% Non Controlling Interest
	(560000-297000-125000)*20%
	27600