Over the next two years, William continued selling inventory to Roberts. Assume that any items in intercompany inventory at the end of a given year were sold to outside parties in the following year. Below are the details of the intercompany inventory sales:

2009	$125,000	$80,000	25%
2010	$220,000	$125,000	28%
2011	$300,000	$160,000	25%

In addition to these transfers of inventory, William sold a building to Roberts on January 1, 2010, for $126,000. The book value of the building was only $70,000 on that date. The building had an eight-year remaining useful life at the time of the transfer and is depreciated using the straight-line method with no salvage method. The building remains on Robert's books as of December 31, 2011.

Separate financial statements for both companies as of December 31, 2011, are shown below: 

Revenues	$(1,740,000)	$(950,000)
Cost of goods sold	$820,000	$500,000
Depreciation expense	$104,000	$85,000
Amortization expense	$220,000	$120,000
Interest expense	$20,000	$15,000
Income from Subsidiary	$(129,600)	0
Net Income	$(705,600)	$(230,000)
Retained earnings, 1/1/09	$(2,856,000)	$(487,000)
Net Income (above)	$(705,600)	$(230,000)
Dividends paid	$200,000	$25,000
Retained earnings, 12/31/09	$(3,361,600)	$(692,000)
Cash	$535,000	$115,000
Accounts receivable	$575,000	$215,000
Inventory	$990,000	$800,000
Investment in William Stock	$1,481,600	0
Buildings and equipment (net)	$1,025,000	$905,000
Patents	$950,000	$107,000
Total assets	$5,556,600	$2,142,000
Accounts payable	$(450,000)	$(200,000)
Notes payable	$(545,000)	$(450,000)
Common stock	$(900,000)	$(700,000)
Additional paid-in capital	$(300,000)	$(100,000)
Retained earnings, 12/31/09 (above)	$(3,361,600)	$(692,000)
Total liabilities and stockholders' equity	$(5,556,600)	$(2,142,000)

Part I

Based on the information given above, complete the following tasks using the excel sheet created in Week 1: 

• Prepare all of the necessary eliminating entries needed at December 31, 2011, using Microsoft Excel.
• Prepare the consolidated income statement, retained earnings statement, and balance sheet as of December 31, 2011, using Microsoft Excel. Be sure to show clearly the noncontrolling interest in both net income and stockholders' equity on your worksheet.

Part II 

Robert's management has recently become vaguely aware of the requirements for FASB Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information." Since both Roberts and William operate in a single industry segment, management assumes that they are not subject to the disclosure requirement of SFAS 131. Draft a one- to two-page memorandum in a Microsoft Word document to your president indicating how, if at all, SFAS 131 applies to your company. Provide succinct but complete communication and, given the nature of the audience, avoid the use of accounting jargon.

Answer rating: 100% (QA)

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