ProForm acquired 70 percent of ClipRite on June 30, 2017, for $770,000 in cash.

Question

ProForm acquired 70 percent of ClipRite on June 30, 2017, for $770,000 in cash. Based on ClipRite's acquisition-date fair value, an unrecorded intangible of $450,000 was recognized and is being amortized at the rate of $12,000 per year. No goodwill was recognized in the acquisition. The noncontrolling interest fair value was assessed at $330,000 at the acquisition date. The 2018 financial statements are as follows:

ClipRite sold ProForm inventory costing $71,000 during the last six months of 2017 for $110,000. At year-end, 30 percent remained. ClipRite sells ProForm inventory costing $210,000 during 2018 for $270,000. At year-end, 10 percent is left. With these facts, determine the consolidated balances for the following:

Sales

Cost of Goods Sold

Operating Expenses

Dividend Income

Net Income Attributable to Noncontrolling Interest

Inventory

Noncontrolling Interest in Subsidiary, 12/31/18

ProForm ClipRite Sales $ (820,000 ) $ (640,000 ) Cost of goods sold 545,000 410,000 Operating expenses 120,000 110,000 Dividend income (49,000 ) 0 Net income $ (204,000 ) $ (120,000 ) Retained earnings, 1/1/18 $ (1,100,000 ) $ (870,000 ) Net income (204,000 ) (120,000 ) Dividends declared 120,000 70,000 Retained earnings, 12/31/18 $ (1,184,000 ) $ (920,000 ) Cash and receivables $ 420,000 $ 320,000 Inventory 310,000 720,000 Investment in ClipRite 770,000 0 Fixed assets 1,200,000 700,000 Accumulated depreciation (400,000 ) (300,000 ) Totals $ 2,300,000 $ 1,440,000 Liabilities $ (816,000 ) $ (220,000 ) Common stock (300,000 ) (300,000 ) Retained earnings, 12/31/18 (1,184,000 ) (920,000 ) Totals $ (2,300,000 ) $ (1,440,000 )

Explanation / Answer

All the balances have been calculated as affected by downstream inventory transfers.

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Part 1)

The value of consolidated sales balance is arrived as below:

_____

Part 2)

The value of consolidated cost of goods sold balance is determined as follows:

_____

Part 3)

The value of consolidated operating expenses balance is calculated as below:

_____

Part 4)

The value of consolidated dividends balance would be $0 as a result elimination in consolidation.

_____

Part 5)

The value of net income attributable to noncontrolling interest is arrived as follows:

_____

Part 6)

The value of consolidated inventory balance is determined as follows:

_____

Part 7)

The value of noncontrolling interest in subsidiary, 12/31/18 is calculated as below:

Proform Sales 820,000 Cliprite Sales 640,000 Intra-entity Sales -270,000 Consolidated Sales Balance $1,190,000

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