ANSWER
Consolidated Totals:
Totals | |
Sales | $1,008,000 |
Cost of Goods sold | $566,000 |
Operating Expenses | $206,000 |
Investment Income | $0 |
Inventory | $287,500 |
Equipment (Net) | $292,000 |
Building (Net) | $528,000 |
Working Notes:
Excess Amortization Expenses
Equipment $60000/10 years = $6000 per year
Equipment $80000/20 years = $4000 per year
Annual excess amortizations $10000
Intra-equity Gross Profit-Inventory, 1/1/18:
Gross profit ($8000-$48000) = $32000
Gross profit rate ($32000/$80000) = 40%
remaining inventory = $35000
Gross profit rate = 40%
Intra-entity Gross Profit-Inventory, 1/1/18 (35000*40%) = 14000
Intra-entity Gross Profit-Inventory, 12/31/18:
Gross profit ($92000-$69000) = $23000
Intra-entity gross profit in ending inventory, 12/31/18 (50000*25%)
= $12500
Impact of Intra-entity Building Transfer:
12/31/17 - Transfer price figures Transfer price = $50000
Gain on transfer ($50000-$30000) = 20000
Depreciation expense ($50000/5 years) = 10000
Accumulated depreciation = 10000
12/31/18 Transfer price figures
depreciation expense = 10000
Accumulated depreciation = 20000
12/31/17 Historical cost figures historical cost =$70000
depreciation expense ($30000 book value/5 years)=$6000
Accumulated depreciation ($40000 + $6000) =$46000
12/31/18 Historical cost figures
Depreciation expenses = 6000
Accumulated depreciation = 52000
Consolidated Balances
Sales = $1008000(700000+400000-92000)
(Add the two book values and subtract $92000 in intra entity
transfers)
Cost of goods sold = $566500(440000+220000-92000-14000+12500)
(Add the two book values and subtract $92000 in intra entity
purchase. Subtract $14000 because of the previous year deferred
intra entity gross profit and add $12500 to defer the current year
intra-entity gross profit in ending inventory.)
Operating Expenses = $206000(120000+80000+10000-4000)
(Add the two book values and include the $10000 excess amortization
expenses but remove the $4000 in excess depreciation expense
($10000-$6000) created by building transfer)
Investment Income = $0
(The intra entity balance is removed because the individual revenue
and expenses accounts of the subsidiary are included for
consolidation)
Inventory = $287500(210000+90000-125000)
(Add the two book values and subtract the $12500 ending intra
entity gross profit)
Equipment (net) = $292000 (140000+110000+60000-18000)
(Add the two book values and include the $60000 allocation from the
acquisition date fair value less three years of excess
amortizations)
Buildings (net) = $528000 (350000+190000+8000-20000)
(Add the two book values and subtract the $20000 intra entity gain
on the transfer after two years of excess depreciation ($4000 per
year))
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