Upstream Sales
Shell Company, an 85% owned subsidiary of Plaster Company, sells merchandise to Plaster Company at a markup of 20% of selling price. During 2011 and 2012, intercompany sales amounted to $442,500 and $386,250, respectively. At the end of 2011, Plaster had one-half of the goods that it purchased that year from Shell in its ending inventory. Plaster”s 2012 ending inventory contained one-fifth of that year”s purchases from Shell. There were no intercompany sales prior to 2011.
Plaster had net income in 2011 of $750,000 from its own operations and in 2012 its independent income was $780,000. Shell reported net income of $322,500 and $335,400 for 2011 and 2012, respectively.
Required:
- Prepare in general journal form all entries necessary on the consolidated financial statement workpapers to eliminate the effects of the intercompany sales for each of the years 2011 and 2012.
- Calculate the amount of noncontrolling interest to be deducted from consolidated income in the consolidated income statement for 2012.
- Calculate controlling interest in consolidated income for 2012.