Adv accounting unit 5
For this assignment, use your Fundamentals of Advanced Accounting text to complete the following:

· Problem 18 on page 248. This problem tests your ability to apply your knowledge of accounting requirements for handling intra-entity transfers of assets in a business combination.

Review the Intra-Entity Transfers Scoring Guide to ensure you complete all grading criteria.

Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2017, when Scenic had a net book value of $400,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $5,000 per year.

Placid Lake’s 2018 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $300,000. Scenic reported net income of $110,000. Placid Lake declared $100,000 in dividends during this period; Scenic paid $40,000. At the end of 2018, selected figures from the two companies’ balance sheets were as follows:

paid $40,000. At the end of 2018, selected figures from the two companies’ balance sheets were as follows:

Placid Lake

Scenic

Inventory

$140,000

$?90,000

Land

600,000

200,000

Equipment (net)

400,000

300,00

During 2017, intra-entity sales of $90,000 (original cost of $54,000) were made. Only 20 percent of this inventory was still held within the consolidated entity at the end of 2017. In 2018, $120,000 in intra-entity sales were made with an original cost of $66,000. Of this merchandise, 30 percent had not been resold to outside parties by the end of the year.

Each of the following questions should be considered as an independent situation for the year 2018.

a.What is consolidated net income for Placid Lake and its subsidiary?

b.If the intra-entity sales were upstream, how would consolidated net income be allocated to the controlling and noncontrolling interest?

c.If the intra-entity sales were downstream, how would consolidated net income be allocated to the controlling and noncontrolling interest?

d.What is the consolidated balance in the ending Inventory account?

e.Assume that no intra-entity inventory sales occurred between Placid Lake and Scenic. Instead, in 2017, Scenic sold land costing $30,000 to Placid Lake for $50,000. On the 2018 consolidated balance sheet, what value should be reported for land?

f.Assume that no intra-entity inventory or land sales occurred between Placid Lake and Scenic. Instead, on January 1, 2017, Scenic sold equipment (that originally cost $100,000 but had a $60,000 book value on that date) to Placid Lake for $80,000. At the time of sale, the equipment had a remaining useful life of five years. What worksheet entries are made for a December 31, 2018, consolidation of these two companies to eliminate the impact of the intra-entity transfer? For 2018, what is the noncontrolling interest’s share of Scenic’s net income?

For this assignment, use your Fundamentals of Advanced Accounting text to complete the following:

· Problem 20 on page 249. This problem requires you to apply your knowledge of the necessary adjustments to financial statement balances resulting from inter-company asset transfers.

Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2017, for $612,000 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 noncontrolling interest was $153,000. No excess fair value over book value amortization accompanied the acquisition.

The following selected account balances are from the individual financial records of these two companies as of December 31, 2018:

Protrade

Seacraft

Sales

$880,000

$600,000

Cost of goods sold

410,000

317,000

Operating expenses

174,000

129,000

Retained earnings, 1/1/18

980,000

420,000

Inventory

370,000

144,000

Buildings (net)

382,000

181,000

Investment income

Not given

–0–

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 and $134,000 in 2018. Of this inventory, Seacraft retained and then sold $52,000 of the 2017 transfers in 2018 and held $66,000 of the 2018 transfers until 2019.

Determine balances for the following items that would appear on consolidated financial statements for 2018:

Cost of Goods Sold

Inventory

Net Income Attributable to Noncontrolling Interest

b.Assume that Seacraft sells inventory to Protrade at a markup 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.

Determine balances for the following items that would appear on consolidated financial statements for 2018:

Cost of Goods Sold

Inventory

Net Income Attributable to Noncontrolling Interest

c.Protrade sells Seacraft a 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:

Buildings (net)

Operating Expenses

Net Income Attributable to Noncontrolling Interest