Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2016, in exchange for...
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Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2016, in exchange for $477,000 in cash. The subsidiary's stockholders' equity accounts totaled $461,000 and the noncontrolling interest had a fair value of $53,000 on that day. However, a building (with a ten-year remaining life) in Brey's accounting records was undervalued by $43,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (four-year remaining life).
Brey reported net income from its own operations of $79,000 in 2016 and $95,000 in 2017. Brey declared dividends of $26,500 in 2016 and $30,500 in 2017.
Year
Cost to Brey
Transfer Price to Pitino
Inventory Remaining at Year-End (at transfer price)
2016
$
84,000
$
190,000
$
40,000
2017
126,000
210,000
52,500
2018
164,500
235,000
70,000
At December 31, 2018, Pitino owes Brey $31,000 for inventory acquired during the period.
The following separate account balances are for these two companies for December 31, 2018, and the year then ended.
Note: Parentheses indicate a credit balance.
Pitino
Brey
Sales revenues
$
(892,000
)
$
(441,000
)
Cost of goods sold
530,000
224,000
Expenses
186,900
88,000
Equity in earnings of Brey
(106,380
)
0
Net income
$
(281,480
)
$
(129,000
)
Retained earnings, 1/1/18
$
(518,000
)
$
(308,000
)
Net income (above)
(281,480
)
(129,000
)
Dividends declared
144,000
51,000
Retained earnings, 12/31/18
$
(655,480
)
$
(386,000
)
Cash and receivables
$
161,000
$
113,000
Inventory
330,000
211,000
Investment in Brey
604,440
0
Land, buildings, and equipment (net)
979,000
343,000
Total assets
$
2,074,440
$
667,000
Liabilities
$
(828,960
)
$
(11,000
)
Common stock
(590,000
)
(270,000
)
Retained earnings, 12/31/18
(655,480
)
(386,000
)
Total liabilities and equity
$
(2,074,440
)
$
(667,000
)
Prepare the 2018 worksheet entry to eliminate the subsidiarys beginning owners equity balances.
Without preparing a worksheet or consolidation entries, determine the consolidation balances for these two companies.
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