Reference no: EM133092792

Problem 1 - On December 31, 2016, P Company purchased 70 percent of the outstanding shares of S Company for 245,000. On that date, S Company had 100,000 of capital stock and 250,000 of retained earnings.

For 2017, P Company had CI of 200,000 from its own operations and paid dividends of 100,000. For 2017, S Company reported CI of 30,000 and paid dividends of 20,000. All assets and liabilities of S Company have book values approximately equal to their book values.

The beginning inventory of P Company includes 6,000 of merchandise purchased from S Company on December 31,2016 at 150 percent of cost. The ending inventory of P Company includes 9,000 of merchandise purchased from S Company at the same mark-up. P Company uses FIFO inventory costing.

Q1. What is the consolidated CI attributable to parent for the year 2017?

Q2. Using the data in question number 1 of problem 1, what is the non-controlling interest in S Company for the year 2017?

Problem 2 - S Company is a wholly owned subsidiary of P Company. During 2017, S Company sold all of its production to P Company for 400,000, a price that includes a 20% gross profit. By year-end, P Company sold 80% of the goods it had purchased for 416,000. The balance of the intercompany goods, remained in the ending inventory and was adjusted to a lower value of 70,000. The adjustment was a charge to the cost of goods sold.

Q1. What is the gross profit on sales recorded by both companies?

Q2. Using the data in question number 1 of problem 2, what is the gross profit to be shown on the consolidated statement of CI?