Question numerous years ago polar inc acquired an 80

Reference no: EM13348778

Question :

Numerous years ago Polar Inc. acquired an 80% interest in Icecap Corp. The book values of Icecap's liability and asset 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 subsequent selected account balances are from the individual financial records of these two companies as of December 31, 2012:

POLAR

INC. ICECAP CORP.

Sales 896,000 504,000

Cost of Goods Sold 406,000 276,000

Operating Expenses 210,000 147,000

Retained Earnings, 1/1/2012 1,036,000 252,000

Inventory 484,000 154,000

Land 250,000 100,000

Buildings, net 501,000 220,000

Investment Income not given

The subsequent transactions have occurred between Icecap and Polar. Polar accounts for its investment in Icecap using the initial value technique:

(a) Icecap sells inventory to Polar at a markup equal to 25% of cost. Intra-entity transfers were $130,000 in 2011 and $165,000 in 2012. Of this inventory, $39,000 of the 2011 transfers were retained and then sold by Polar in 2012, while $55,000 of the 2012 transfers were held until 2013.

(b) Polar sold a building to Icecap on January 1, 2010 for $112,000, though the book value of this asset was only $70,000 on that date. The building had a five-year remaining practical life and was to be depreciated using the straight-line method with no salvage value.

(c) Icecap sold land to Polar on January 1, 2009 for $100,000, though the book value of this asset was only $65,000 on that date. Polar employs this land in its overall operations.

REQUIRED:

(1) In good form, prepare the consolidation removal entries needed in connection with transactions (a) - (c) at December 31, 2012. Label those entries: Requirement (1a), (1b), and (1c), as corresponds to the unique transactions.

(2) In good form, organize a schedule showing the noncontrolling interest in the consolidated 2012 net income.

(3) In good form, purpose the consolidation elimination entries needed in connection with transactions (a) - (c) at December 31, 2013. Label those entries: Requirement (3a), (3b), and (3c), as corresponds to the original transactions.

Reference no: EM13348778

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