Advanced Accounting: Problem Sets
Exercise 6-1 Part A (1) Sales 2,700,000 Purchases (Cost of Goods Sold) 2,700,000 To eliminate intercompany sales of 2011 (2) 12/31 Inventory-Income Statement (Cost of Goods Sold) 487,500 12/31 Inventory (Balance Sheet) 487,500 To eliminate unrealized intercompany profit in inventory
Exercise 6-2 Reported Net Income- S Company $ 525,000 Noncontrolling Interest Percentage 0.20 Noncontrolling Interest in Net Income $ 105,000
Exercise 6-3 2011 Reported net income $ 30,000 Unrealized intercompany profit included therein = $5,200; $5,200 0.25 = (1,300) Profit included in consolidated income 28,700 Percentage interest 0.10 Noncontrolling interest in consolidated income $ 2,870 2012 (Rounded to nearest dollar) Reported net income $ 35,000 Intercompany profit included in beginning inventory, now realized 1,300 Unrealized intercompany profit included therein = $6,250; $6,250 0.25 = (1,563) Profit included in consolidated income 34,737 Percentage interest 0.10 Noncontrolling interest in consolidated income $ 3,474
Exercise 6-4
The $600,000 that could not be assigned to specific assets and liabilities is assumed to represent goodwill (the unidentifiable intangible asset), which is not amortized under current GAAP but is reviewed periodically for impairment. In contrast, identifiable intangible assets would be amortized if they have a definite life but not if the life is indefinite in duration. Thus, only if the $600,000 pertained to an identifiable intangible asset with a finite life would amortization be required. We assume that is not the case here.
2011 Pearce Company 's net income from its independent operations $1,500,000 Amount of income not realized in transactions with third parties ($90,000 – ) (18,000)
Exercise 6-2 Reported Net Income- S Company $ 525,000 Noncontrolling Interest Percentage 0.20 Noncontrolling Interest in Net Income $ 105,000
Exercise 6-3 2011 Reported net income $ 30,000 Unrealized intercompany profit included therein = $5,200; $5,200 0.25 = (1,300) Profit included in consolidated income 28,700 Percentage interest 0.10 Noncontrolling interest in consolidated income $ 2,870 2012 (Rounded to nearest dollar) Reported net income $ 35,000 Intercompany profit included in beginning inventory, now realized 1,300 Unrealized intercompany profit included therein = $6,250; $6,250 0.25 = (1,563) Profit included in consolidated income 34,737 Percentage interest 0.10 Noncontrolling interest in consolidated income $ 3,474
Exercise 6-4
The $600,000 that could not be assigned to specific assets and liabilities is assumed to represent goodwill (the unidentifiable intangible asset), which is not amortized under current GAAP but is reviewed periodically for impairment. In contrast, identifiable intangible assets would be amortized if they have a definite life but not if the life is indefinite in duration. Thus, only if the $600,000 pertained to an identifiable intangible asset with a finite life would amortization be required. We assume that is not the case here.
2011 Pearce Company 's net income from its independent operations $1,500,000 Amount of income not realized in transactions with third parties ($90,000 – ) (18,000)