Following are several figures reported for Allister and Barone as of December 31, 2018:
Allister | Barone | |||
Inventory | $ | 490,000 | $ | 290,000 |
Sales | 980,000 | 780,000 | ||
Investment income | not given | |||
Cost of goods sold | 490,000 | 390,000 | ||
Operating expenses | 225,000 | 295,000 | ||
Allister acquired 80 percent of Barone in January 2017. In allocating the newly acquired subsidiary's fair value at the acquisition date, Allister noted that Barone had developed a customer list worth $76,000 that was unrecorded on its accounting records and had a 5-year remaining life. Any remaining excess fair value over Barone's book value was attributed to goodwill. During 2018, Barone sells inventory costing $129,000 to Allister for $178,000. Of this amount, 20 percent remains unsold in Allister's warehouse at year-end.
Determine balances for the following items that would appear on Allister's consolidated financial statements for 2018:
Answer:
Particulars | Amount | Working notes |
INVENTORY | $ 7,70,200 |
=4,90,000+2,90,000-9,800 =7,70,200(add inventory values and less unreailsed profit) |
SALES | $ 15,82,000 |
=9,80,000+7,80,000-1,78,000 =15,82,000(add sales value and less intra entity value) |
COST OF GOODS SOLD | $ 7,11,800 |
=4,90,000+3,90,000-1,78,000+9,800 =7,11,800(add cost of goods sold values-intra entity transfer+unreailsed profit) |
OPERATING EXPENSES | $ 5,35,200 |
=2,25,000+2,95,000+,15,200 =5,35,200(add operating exp values and add amortization expense) |
NET INCOME attribution to non controlling interest | $ 14,000 |
=(7,80,000-3,90,000-2,95,000-15,200-9,800)*20% =70,000*20/100 =14,000(20% of barone's net income , less amortization expense and less unrealised profit) |
NOTE:
Customer list amortization=76,000/5yrs
=$15,200 per annum
Intra -entity gross profit = 1,78,000-1,29,000
=$49,000 (inventory remaining at year end)
Unrealised profit =49,000*20/100 (20% on unsold stock)
=$9,800
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