Question

Plug Products owns 80 percent of the stock of Spark Filter Company, which it acquired at underlying book value on August 30, 20X6. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of Spark Filter. Summarized trial balance data for the two companies as of December 31, 20X8, are as follows: $ Spark Filter Company Debit Credit $ 109,000 114,000 185,000 Plug Products Debit Credit 146,000 231,000 277,000 260,400 170,000 50,000 $ 193,400 186,000 460,000 261,000 34,000 Cash and Accounts Receivable Inventory Buildings & Equipment (net) Investment in Spark Filter Company Cost of Goods Sold Depreciation Expense Current Liabilities Common Stock Retained Earnings Sales Income from Spark Filter Company Total 135,000 40,000 $ 69,000 89,000 214,000 211,000 $1,134,400 $1,134,480 $583,000 $583,000 On January 1, 20X8, Plug's inventory contained filters purchased for $68,000 from Spark Filter, which had produced the filters for $48,000. In 20X8, Spark Filter spent $108,000 to produce additional filters, which it sold to Plug for $153,000. By December 31, 20X8, Plug had sold all filters that had been on hand January 1, 20X8, but continued to hold in inventory $45,900 of the 20X8 purchase from Spark Filter Required: a. Prepare all consolidation entries needed to complete a consolidation worksheet for 20X8. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Please Find Below Spreadsheet useful to compute Desired Results: -

A D G Н No. Account Titles and Explanation Common Stock Retained Earnings Income from Spark Filter Company NCI in NI of Spark Filter Investment in Spark Filter company Debit 89000 214000 34000 Calculation of inter company inventory transfer profit Credit 1 Intercompany Profit on Beg. Inventory Inventory Price Cost of Inventory held Profit on Beginning Inventory 68000 48000 -НЗ-Н4 =F33 5 -SUM(C2:C5 ) *0.8 -SUM(C2:C5)*0.2 Share of Phug In Beg. Inventory 6 =H5 *0.8 NCI in NA of Spark Filter 7 -H5*0.2 (to record bais consolidation Entry) Share of NCI in Beg. Inventory 8 9 Intercompany profit on Ending Inventory Investment in Spark Filter NCI in NA of Spark Filter -H7 10 153000 108000 = H11 - H12 H13 / H11 45900 Total Inventory sold cost of Inventory sold Profit on inventory sold Profit %age Ending Inventory held Profit in Ending Inventory Share of Plug in End. Inventory Share of NCI in End. Inventory =H8 11 -H5 Cost of Goods Sold 12. (to eliminate the beginning inventory intercompany profit) 13 14 Sales =H11 15 = H15 H14 =H16 *0.8 -H16*0.2 -C15-D17 -H16 Cost of Goods Sold 16 Inventory 17 (to eliminate current year inventory sold and ending profit) 18 19 Spark 211000 135000 40000 Common Stock of Spark Filter Retained Earnings of Spark Filter Book Value of Spark Filter as on January Share of NCI in Spark Filter Add: Net Income Assigned to NCI -C2 Plug Total = F21 +G21 =F22+G22 -F23+G23 Calculation of Net Income 20 Sales less: Cost of Goods Sold Less: Depreciation Expenses Equity Income from Spark Filter Net Income before Adjustment Add: Beginning intercompany inventory Profit ЕCЗ -C20+C21 -C22*0.2 - F33 -C23+C24 Less: Share of NCI in Beg. Intercompany Profit =H8 261000 21 170000 22 50000 23 - F24 +G24 -C4 24 =F21-F22-F23+F24=G21-G22-G23+G24 F25+G25 -H5 25 =F26+G26 26

A. В C D F Н Non-controlling Interest Less: Ending Intercompany Inventory Profit Less: Income from Spark Filter Separate Net Income Consolidated Net Income Net Income Attributable to NCI Income Assigned to Controlling Interest Share of NCI in Spark Filter Income Share of Plug -F27+G27 -F28+G28 -H16 -C25-С26 27 = F24 28 =F25-F28 -G25+G26-G27 29 -F29+G29 -G29*0.2 -нз0-НЗ1 30 31 32 -G29*0.2 G29*0.8 33 34

End Results would appear as follows: -

с D G н No. Account Titles and Explanation Common Stock Retained Earnings Income from Spark Filter Company NCI in NI of Spark Filter Investment in Spark Filter company Debit Calculation of inter company inventory transfer profit Credit 1 Intercompany Profit on Beg. Inventory Inventory Price Cost of Inventory held Profit on Beginning Inventory $89,000.00 2 $68,000.00 $48,000.00 $20,000.00 $214,000.00 $34,000.00 $8,500.00 5 $276,400.00 $69,100.00 Share of Phig In Beg. Inventory 6 $16,000.00 NCI in NA of Spark Filter 7 Share of NCI in Beg. Inventory (to record bais consolidation Entry) $4,000.00 8 9 Investment in Spark Filter NCI in NA of Spark Filter Intercompany profit on Ending Inventory $16,000.00 10 Total Inventory sold $20,000.00 cost of Inventory sold Profit on inventory sold Profit %age Ending Inventory held $139,500.00 Profit in Ending Inventory $13,500.00 Share of Plug in End. Inventory Share of NCI in End. Inventory $153,000.00 $108,000.00 $45,000.00 29.41% $45,900.00 $13,500.00 $10,800.00 $2,700.00 $4,000.00 11 Cost of Goods Sold 12. (to eliminate the beginning inventory intercompany profit) 13 14 $153,000.00 Sales 15 Cost of Goods Sold 16 Inventory (to eliminate current year inventory sold and ending profit) 17 18 19 Spark S261,000.00 S211,000.00 S472,000.00 $170,000.00 S135,000.00 S305,000.00 $50,000.00 $40,000.00 $90,000.00 Common Stock of Spark Filter Retained Earnings of Spark Filter Book Value of Spark Filter as on January Share of NCI in Spark Filter Add: Net Income Assigned to NCI $89,000.00 $214,000.00 $303,000.00 $60,600.00 Plug Total Calculation of Net Income 20 Sales less: Cost of Goods Sold Less: Depreciation Expenses Equity Income from Spark Filter Net Income before Adjustment Add: Beginning intercompany inventory Profit 21 22 23 $34,000.00 $8,500.00 $69,100.00 $4,000.00 $34,000.00 24 $75,000.00 $36,000.00 $111,000.00 $20,000.00 $20,000.00 25 Less: Share of NCI in Beg. Intercompany Profit 26

A C F G $13,500.00 $13,500.00 S34,000.00 Non-controlling Interest Less: Ending Intercompany Inventory Profit Less: Income from Spark Filter Separate Net Income Consolidated Net Income Net Income Attributable to NCI Income Assigned to Controlling Interest Share of NCI in Spark Filter Income $65,100.00 27 $34,000.00 $41,000.00 $42,500.00 28 29 $83,500.00 $8,500.00 $75,000.00 30 31 32 $8,500.00 33 $34,000.00 Share of Plug 34