Question: Peer Company acquired an 80 interest in Sells Company on

Peer Company acquired an 80% interest in Sells Company on January 1, 2011, for $1,600,000. On this date, the common stock and retained earnings balances were $1,500,000 and $500,000, respectively. During the year, Peer Company sold merchandise to Sells Company for $200,000. Only one-fourth of this merchandise was in Sells Company’s 2011 ending inventory, and $10,000 of this amount is unrealized profit.\ On January 2, 2011, Sells Company sold equipment with a book value of $300,000 to Peer Company for $400,000. The equipment has a remaining useful life of four years. Sells Company’s net income for 2011 was $300,000, while Peer Company’s was $800,000. Neither company declared dividends in 2011. The affiliated companies file separate income tax returns, the dividends received exclusion is 80%, and the prior, current, and expected future marginal income tax rates for both companies are 40%.

A. Prepare in general journal form all consolidated statements workpaper entries necessary for 2011.
B. Calculate the controlling interest in consolidated net income for the year ended December 31, 2011.
C. Calculate the noncontrolling interest in consolidated income for the year ended December 31, 2011.

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  • CreatedMarch 13, 2015
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