Reference no: EM131565662
Problem -
Several years ago, Polar Inc. acquired an 80% interest in Icecap Co. The book values of Icecap's asset and liability accounts at that time were considered to be equal to their fair values. Polar's acquisition value corresponded to the underlying book value of Icecap so that no allocations or goodwill resulted from the transaction.
The following selected account balances were from the individual financial records of these two companies as of December 31, 20X1.
Polar Inc.
Icecap Co.
Sales
$896,000
$504,000
Cost of goods sold
406,000
276,000
Operating expenses
210,000
147,000
Retained earnings, 1/1/11
1,036,000
252,000
Inventory
484,000
154,000
Buildings (net)
501,000
220,000
Investment income
Not given
Assume that Polar sold inventory to Icecap at a markup equal to 25% of cost. Intra-entity transfers were $130,000 in 20X0 and $165,000 in 20X1. Of this inventory, $39,000 of the 20X0 transfers were retained and then sold by Icecap in 20X1, while $55,000 of the 20X1 transfers were held until 20X2.
For the consolidated financial statements for 20X1, determine the balances that would appear for the following accounts.
(1) Cost of Goods Sold
(2) Inventory
(3) Noncontrolling Interest in Subsidiary's Net Income.