Reference no: EM132410238
Question
Several years ago Polar Inc. acquired an 75% 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, 2018.
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, 1/1/18 $1,036,000 $252,000
Inventory $484,000 $154,000
Building (net) $501,000 $220,000
Investment income not given
Assume that Polar sold inventory to Icecap at a gross profit rate of 30%. Intra-entity transfers were $230,000 in 2017 and $165,000 in 2018. Of this inventory, $39,000 of the 2017 transfers were retained and then sold by Icecap in 2018, while $55,000 of the 2018 transfers were held until 2019.
Required:
For the consolidated financial statements for 2018, determine the balances that would appear for the following accounts: (1) Cost of Goods Sold, (2) Inventory, and (3) Non-controlling interest in Subsidiary's Net Income.
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