Question: The separate income statements of Coors Company and its 60

The separate income statements of Coors Company and its 60% owned subsidiary, Vespa Company, for the year ended December 31, 2017, are as follows:
The following additional information is available:
a. Coors Company acquires its interest in Vespa Company on July 1, 2015. The excess of cost over book value is attributable to machinery which is undervalued by a total amount of $100,000. The remaining life of the machine is 20 years.
b. Vespa Company sells a machine to Coors Company on December 31, 2016, for $10,000. This machine has a book value of $6,000 and an estimated future life of four years at the purchase date. Straight-line depreciation is assumed.
c. Coors Company sells $15,000 worth of merchandise to Vespa Company during 2017. Cooper sells its merchandise at a price that enables it to realize a gross profit of 25%. Vespa Company has $2,000 worth of Coors merchandise in its ending inventory.
d. A corporate income tax rate of 30% is assumed.
Prepare the worksheet adjustments (in journal entry format) pertaining to the purchase cost amortization and the intercompany transactions, and prepare the inter period tax allocations that result from the elimination of the intercompany transactions. The companies do not qualify as an affiliated group under the tax code.

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  • CreatedApril 13, 2015
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