Example 1: Upstream Inventory Transfer with Noncontrolling Interest

Parent acquires 70% interest in subsidiary on January 1, 2010

In 2014, subsidiary sells inventory costing $80,000 to parent for $120,000. 20% of this inventory was not sold to outsiders by the parent until 2015 (meaning that 80% of the transferred inventory was sold in ______(year).

In 2015, subsidiary sells inventory costing $100,000 to parent for $150,000. 40% of this inventory was not sold to outsiders until 2016.

In 2015, parent reported cost of goods sold of $500,000 and subsidiary reported cost of goods sold of $ $300,000. Also, the parent net income in 2015 is $50,000.

What is consolidated cost of goods sold in 2015?

What is noncontrolling interest in net income of subsidiary

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Example2: Intercompany Depreciable Asset transfer

Parent buys building on January 1, 2010 for $500,000. Useful life is 10 years. On January 1, 2015 parent sells building to 100% owned subsidiary for $400,000. Subsidiary determines remaining useful life is 5 years.

Prepare consolidation entries for December 31, 2015

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Example3: Intercompany transfer of Land:

Parent purchases land on January 1, 2012 for $500,000.

On January 1, 2013 parent sells land to it 100% owned subsidiary for $700,000.

Subsidiary holds land for 3 years and then on December 31, 2015 sells to unrelated third party for $800,000.

Show entries for the parent, the subsidiary, and consolidated entries for 2012, 2013, 2014, and 2015.

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Example4: Sales and Purchases Accounts (100% of Inventory Remains).

1.Arlington Company sales inventory costing $50,000 for $80,000 to Zirkin Company, an affiliated party within the business combination.

Only a Portion of Inventory Remains

2.Arlington transferred inventory costing $50,000 to Zirkin, a related company, for $80,000. At year-end Zirkin has resold $60,000 of these goods to unrelated parties.