Protrade Corporation acquired 80 percent of the outstanding voting stock of Seac

Question

Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1,2017, for $500,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft's identifiable assets and liabilities at a collective net fair value of $765,000 and the fair value of the 20 percent noncont amortization accompanied the acquisition. rolling interest was $125,000. No excess fair value over book value The following selected account balances are from the individual financial records of these two companies as of December 3 Sales Cost of goods sold Operating Retained earnings, 1/1/18 Inventory Buildings (net) S 888,000 s 600,e0 10,080 317,000 174,000 129,008 980,000 428,000 378,800134,800 382,000 181,0e8 Each of the following problems is an independent situation: a. Assume that Protrade sells Seacraft inventory at a markup equal to 60 percent of cost. Intra-entity transfers were $114,000 in 2017 the 2018 transfers until 2019. mine baiances for the following items that would appear on consolidated financial statements for 2018 b. Assume that Seacraft sells inventory to Protrade at a morkup equal to 60 percent of cost Intra-entity transfers were $74,000 in 2017 and $104.000 in 2018. Of this inventory, $45,000 of the 2017 transfers were retained and then sold by Protrade in 2018, whereas $59,000 of the 2018 transfers were held until 2019 for 2018 e. Protrade sells e building on January 1, 2017, for $128,000, although its book value was only $74,000 on this date. The building had a five-year remaining life and was to be depreciated using the straight-line method with no salvage value Determine balances for the following items that would appear on consolidated financial statements for 2018 Prev7 of 8 Next > e here to

Explanation / Answer

SOLUTION

1. Cost of goods sold = 410,000 + 317,000 - (134,000 - 66,000) = 659,000

Inventory = 370,000 + 134,000 - (66,000*60/160) = 479,250

Net income to non controlling interest = (600,000 - 317,000 - 129,000)*20% = 30,800

2.

Cost of goods sold = 410,000 + 317,000 - (104,000 - 59,000) = 682,000

Inventory = 370,000 + 134,000 - (59,000*60/160) = 481,875

Net income to non controlling interest = (600,000 - 317,000 - 129,000 - 59,000*60/160 + 45,000*60/160)*20% = 29,750

3.

Building = 382,000 + 181,000 - (128,000 - 74,000)*3/5 = 530,600

Operating expenses = 174,000 + 129,000 = 303,000

Net income to non controlling = (600,000 - 317,000 - 129,000)*20% = 30,800

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