Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2014, when Scenic had a net book value of $400,000. Any excess fair value was assigned to intangible assets and amortized at a
Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2014, when Scenic had a net book value of $400,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $5,000 per year.
Placid Lake’s 2015 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $300,000. Scenic reported net income of $110,000. Placid Lake declared $100,000 in dividends during this period; Scenic paid $40,000. At the end of 2015, selected figures from the two companies’ balance sheets were as follows:
During 2014, intra-entity sales of $90,000 (original cost of $54,000) were made. Only 20 percent of this inventory was still held within the consolidated entity at the end of 2014. In 2015, $120,000 in intra-entity sales were made with an original cost of $66,000. Of this merchandise, 30 percent had not been resold to outside parties by the end of the year.
Each of the following questions should be considered as an independent situation for the year 2015.
a. What is consolidated net income for Placid Lake and its subsidiary?
b. If the intra-entity sales were upstream, how would consolidated net income be allocated to the controlling and noncontrolling interest?
c. If the intra-entity sales were downstream, how would consolidated net income be allocated to the controlling and noncontrolling interest?
d. What is the consolidated balance in the ending Inventory account?
e. Assume that no intra-entity inventory sales occurred between Placid Lake and Scenic. Instead, in 2014, Scenic sold land costing $30,000 to Placid Lake for $50,000. On the 2015 consolidated balance sheet, what value should be reported for land?
f. Assume that no intra-entity inventory or land sales occurred between Placid Lake and Scenic. Instead, on January 1, 2014, Scenic sold equipment (that originally cost $100,000 but had a $60,000 book value on that date) to Placid Lake for $80,000. At the time of sale, the equipment had a remaining useful life of five years. What worksheet entries are made for a December 31, 2015, consolidation of these two companies to eliminate the impact of the intra-entity transfer? For 2015, what is the noncontrolling interest’s share of Scenic’s net income?Intangible Assets
An intangible asset is a resource controlled by an entity without physical substance. Unlike other assets, an intangible asset has no physical existence and you cannot touch it.Types of Intangible Assets and ExamplesSome examples are patented... Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Placid Lake Scenic $ 90,000 200,000 300,000 $140,000 Inventory Land 600,000 400,000 Equipment (net).
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a Placid Lake s 2015net income before effect from Scenic 300 000 Scenic s reported net income2015 110 000 Amortization expense given 5 000 Realization of 2014 intra entity gross profit see below 7 200 …View the full answer
This video is about ways to attempt consolidated balance sheet questions. since the unconsolidated financial statements of parent and subsidiary companies are prepared separately, consolidating the balance sheets of both companies is critical and sometimes becomes complex. the tutorial will guide students on to how questions on attempting questions on consolidated financial statements in an easier yet more effective way.
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