Reference no: EM131195717
Answer any five questions. Label all answer. Show all computation. Explain all answers in detail.
1. On January 1. 2014, S Co. had capital stock of $loomoo and retained earnings of $80.000. P Co. bought 90% of S Co. stock on that date for $180,000. The following S Co. information at January 1, 2014 was available:
Book Value Fair Value
Inventory, 1/1 $8,000 $10,000
Land 50,000 51,000
Equipment(net) 100,000 110,000
a Prepare the work paper entries to eliminate the difference between book and fair value for December 31, 2014, 2015 and 2016.
2. If P Co. had reported income of $100,000 each year, compute consolidated income of 2014, 2015, and 2016, and combined income for each year.
3. P Co. buys 70% of S Co. on 1-1-15. S sells merchandise to P at a markup of 30% of cost. During 2015 and 2016. intercompany sales were $260,000 and $390,000 respectively. At the end of each year, P had 40% of the goods purchased from S still in inventory. There were no intercompany sales prior to 2015. Prepare, in general journal form, all entries necessary on the consolidated statement worksheets for EACH year to eliminate all effects of intercompany sales. Label each year.
4. Referring to Problem 2, if P had reported income of $800,000 each year and S had reported income of $500,000 each year, calculate combined income EACH year.
Referring to Problem 2, what was the non-controlling share of income for each year?
5. Co. P. owns 80% of Co. S. P sells equipment, which cost it $700,000 to S for $800,000, on January 1, 2015. The equipment has a remaining life of 4 years. Give the consolidation work paper eliminating entries needed on December 31, 2015 and December 31, 2016. Label each year.
6. Refer to Problem 4. If P has income of $500.000 each year and S has income of $200.000 each year, calculate the combined income for P and P's share of S for EACH year.
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