Reference no: EM133076956

Question - On January 2, 2017 perpetual industries acquired 80% of sawyer corporations voting stock. Sawyers reported assets and liabilities had book values that approximated fair value at date of acquisition, but it had previously unreported customers lists (5 year life, SL) valued at $400,000.

It is now December 31, 2020, four years after the date of acquisition. Additional information is as follows:

For 2020, Sawyer reported income of $800,000.

Sayer sells merchandise to perpetual at markup of 30% over cost. Perpetual's beginning inventory for 2020 includes $520,000 in merchandise purchased from sawyer. Perpetual ending inventory for 2020 includes $390,000 in merchandise purchased from sawyer. Total sales from sawyer to perpetual were 2,000,000

Perpetua sold land to sawyer in 2020 for $1,000,000, Perpetual reported a $300,000 loss on the sale. Sawyer still holds the land.

Perpetual sold equipment with original cost of $600,000 and a book value of $500,000 to Sawyer at the beginning of 2019 and charged Sawyer $900,000. The equipment had a remaining life of 8 years at the time of transfer. Sawyer still holds the equipment.

Required -

1. Prepare the working paper entries made in consolidation at December 31, 2020 related to the intercompany transaction.

2. Calculate 2020 equity in net income of sawyer, reported on perpetual separate books and the 2020 non-controlling interest in net income of sawyer reported on perpetual consolidated financial statement.