Incomplete Data
Lever Corporation acquired 75 percent of the ownership of Tropic Company on January 1, 20X1. The fair value of the noncontrolling interest at acquisition was equal to its proportionate share of the fair value of the net assets of Tropic. The full amount of the differential at acquisition was attributable to buildings and equipment, which had a remaining useful life of eight years. Financial statement data for the two companies and the consolidated entity at December 31, 20X6, are as follows:
LEVER CORPORATION AND TROPIC COMPANY Balance Sheet Data December 31, 20X6 | |||
Item | Lever Corporation | Tropic Company | Consolidated Entity |
Cash | $ 67,000 | $ 45,000 | $112,000 |
Accounts Receivable | ? | 55,000 | 145,000 |
Inventory | 125,000 | 90,000 | 211,000 |
Buildings and Equipment | 400,000 | 240,000 | 680,000 |
Less: Accumulated Depreciation | (180,000) | (110,000) | ( ? ) |
Investment in Tropic Company | ? |
|
|
Total Assets | $ ? | $320,000 | $ ? |
Accounts Payable | $ 86,000 | $ 20,000 | $ 89,000 |
Other Payables | ? | 8,000 | ? |
Notes Payable | 250,000 | 120,000 | 370,000 |
Common Stock | 120,000 | 60,000 | 120,000 |
Retained Earnings | 172,500 | 112,000 | 172,500 |
Noncontrolling Interest |
|
| 44,500 |
Total Liabilities and Equity | $ ? | $320,000 | $ ? |
LEVER CORPORATION AND TROPIC COMPANY Income Statement Data For the Year Ended December 31, 20X6 | |||
Item | Lever Corporation | Tropic Company | Consolidated Entity |
Sales | $420,000 | $260,000 | $650,000 |
Income from Subsidiary | 32,250 |
|
|
Total Income | $452,250 | $260,000 | $650,000 |
Cost of Goods Sold | $310,000 | $170,000 | $445,000 |
Depreciation Expense | 20,000 | 25,000 | 50,000 |
Interest Expense | 25,000 | 9,500 | 34,500 |
Other Expenses | 22,000 | 15,500 | 37,500 |
Total Expenses | ($377,000) | ($220,000) | ($567,000) |
Consolidated Net Income |
|
| $ 83,000 |
Income to Noncontrolling Interest |
|
| (7,750) |
Controlling Interest in Net Income | $ 75,250 | $ 40,000 | $ 75,250 |
All unrealized profit on intercompany inventory sales on January 1, 20X6, were eliminated on Lever’s books. All unrealized inventory profits at December 31, 20X6, were eliminated on Tropic’s books. Assume Lever uses the fully adjusted equity method and that Lever does not make the optional depreciation elimination worksheet entry.
Required
a. For the buildings and equipment held by Tropic when it was acquired by Lever and still on hand on December 31, 20X6, by what amount had they increased in value from their acquisition to the date of combination with Lever?
b. What amount should be reported as accumulated depreciation for the consolidated entity at December 31, 20X6 (assuming Lever does not make the optional accumulated depreciation elimination entry)?
c. If Tropic reported capital stock outstanding of $60,000 and retained earnings of $30,000 on January 1, 20X1, what amount did Lever pay to acquire its ownership of Tropic?
d. What balance does Lever report as its investment in Tropic at December 31, 20X6?
e. What amount of intercorporate sales of inventory occurred in 20X6?
f. What amount of unrealized inventory profit exists at December 31, 20X6?
g. Give the eliminating entry used in eliminating intercompany inventory sales during 20X6.
h. What was the amount of unrealized inventory profit at January 1, 20X6?
i. What balance in accounts receivable did Lever report at December 31, 20X6?
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