Hollow Corporation acquired 70 percent of Surg Corporation€™s voting stock on May 18, 20X1. The companies reported the following data with respect to intercompany sales in 20X4 and 20X5:

Hollow reported operating income (excluding income from its investment in Surg) of $160,000 and $220,000 in 20X4 and 20X5, respectively. Surg reported net income of $90,000 and $85,000 in 20X4 and 20X5, respectively.

Required
a. Compute consolidated net income for 20X4.
b. Compute the inventory balance reported in the consolidated balance sheet at December 31, 20X5, for the transactions shown.
c. Compute the amount included in consolidated cost of goods sold for 20X5 relating to the transactions shown.
d. Compute the amount of income assigned to the controlling interest in the 20X5 consolidated incomestatement.

Transcribed Image Text:

Purchased Purchase Sold to Sale Price Unsold at End of Year Year Sold to Unaffiliated Co 20X5 20x6 20x6 Year by Price 20X4 Surg Corp. $120,000 Hollow Corp. $180,000 45,000 20X5 Surg Corp 20X5 Hollow Corp. 140,000 Surg Corp. 280,000 110,000 90,000 Hollow Corp. 135,000 30,000