Computations of separate and consolidated statements given
Pet Corporation acquired an 80 percent interest in She Corporation on January 1, 2011, for $320,000, at which time She had capital stock of $200,000 outstanding and retained earnings of $100,000. The price paid reflected a $100,000 undervaluation of She’s plant and equipment. The plant and equipment had a remaining useful life of eight years when Pet acquired its interest.
Separate and consolidated financial statements for Pet Corporation and its subsidiary, She Corporation, for the year ended December 31, 2013, are as follows:
|
Pet |
She |
Consolidated |
|
|
Combined Income and Retained |
|||
|
Earnings Statement for the Year |
|||
|
Ended December 31, 2013 |
|||
|
Sales |
$ 180,000 |
$100,000 |
$230,000 |
|
Income from She |
20,000 |
— |
— |
|
Interest income |
— |
8,000 |
— |
|
Cost of goods sold |
(110,000) |
(60,000) |
(110,000) |
|
Operating expenses |
(30,000) |
(18,000) |
(58,000) |
|
Interest expense |
(18,000) |
— |
(9,000) |
|
Loss |
— |
— |
(3,000) |
|
Noncontrolling interest share |
— |
— |
(8,000) |
|
Controlling share of net income |
42,000 |
30,000 |
42,000 |
|
Add: Beginning retained earnings |
294,000 |
135,000 |
294,000 |
|
Deduct: Dividends |
(20,000 ) |
(15,000 ) |
(20,000 ) |
|
Ending retained earnings |
$ 316,000 |
$150,000 |
$316,000 |
|
Balance Sheet at December 31, 2013 |
|||
|
Cash |
$ 60,000 |
$ 26,000 |
$ 86,000 |
|
Accounts receivable |
120,000 |
$ 60,000 |
165,000 |
|
Inventories |
100,000 |
50,000 |
140,000 |
|
Plant and equipment |
500,000 |
200,000 |
780,000 |
|
Accumulated depreciation |
(100,000) |
(50,000) |
(180,000) |
|
Investment in She stock |
320,000 |
— |
— |
|
Investment in Pet bonds |
— |
104,000 |
— |
|
Total assets |
$1,000,000 |
$390,000 |
$991,000 |
|
Accounts payable |
$ 80,000 |
$ 40,000 |
$105,000 |
|
10% bonds payable |
204,000 |
— |
102,000 |
|
Common stock |
400,000 |
200,000 |
400,000 |
|
Retained earnings |
316,000 |
150,000 |
316,000 |
|
Noncontrolling interest |
— |
— |
68,000 |
|
Total equities |
$1,000,000 |
$390,000 |
$991,000 |
She sells merchandise to Pet but never purchases from Pet. On January 1, 2013, She purchased $100,000 par of 10 percent Pet Corporation bonds for $106,000. These bonds mature on December 31, 2015, and She expects to hold the bonds until maturity. Both She and Pet use straight line amortization. Interest is payable on December 31.
REQUIRED: Show computations for each of the following items:
1. The $3,000 loss in the consolidated income statement
2. The $230,000 consolidated sales
3. Consolidated cost of goods sold of $110,000
4. Intercompany profit in beginning inventories
5. Intercompany profit in ending inventories
6. Consolidated accounts receivable of $165,000
7. Noncontrolling interest share of $8,000
8. Noncontrolling interest at December 31, 2013
9. Investment in She stock at December 31, 2012
10. Investment income account of $20,000 (Pet’s books)