Chapter 6

Intercompany Inventory Transactions

1
OVERVIEW OF THE CONSOLIDATED ENTITY
AND INTERCOMPANY TRANSACTIONS

3
INVENTORY TRANSACTIONS

• All revenue and expense items recorded by the

participants must be eliminated fully in preparing
the consolidated income statement.
• The recorded value of transferred assets must be
adjusted so that they appear in the consolidated
balance sheet at the original owner’s cost.

4
Calculating Unrealized Profit or Loss

Realized intercompany profit= 600

Consolidated profit= 1.100

Unrealized intercompany profit= 200

Consolidated profit= 0

5
DOWNSTREAM SALE OF INVENTORY
• Peerless Products Corporation purchases 80 percent of Special Foods Inc.’s stock on
December 31, 20X0, at the stock’s book value of $240,000. The fair value of Special Foods’
non controlling interest on that date is $60,000, the book value of those shares.
• On April, 20X1, Peerless sale inventory to Special Foods for $10,000. Cost of the inventory
is $7,000
• On November 5, 20X1, Special Foods sells the inventory purchased from Peerless to a
nonaffiliated party for $15,000.
• During 20X1, Peerless reports separate income of $140,000 income from regular
operations and declares dividends of $60,000. Special Foods reports net income of
$50,000 and declares dividends of $30,000.

• 20X1 Realized intercompany profit = ?? 3.000

• 20X1 Unrealized intercompany profit = ?? 0
• 20X1 Consolidated profit = ?? 190.000

6
Journal in Peerless’s Books:

Equity method Cost Method

31/12/X0 Investment in SF stock 240,000 31/12/X0 Investment in SF stock 240,000

Cash 240,000 Cash 240,000
01/04/X1 Cash 10,000 01/04/X1 Cash 10,000
Sales 10,000 Sales 10,000
Cost of good sold 7,000 Cost of good sold 7,000
Inventory 7,000 Inventory 7,000
31/12/X1 Investment in SF stock 40,000 31/12/X1 NO ENTRIES
Income from SF 40,000
Cash 24,000 Cash 24,000
Investment in SF stock 24,000 Dividend income 24,000

7
Journal in Special Food’s Books:

01/04/X1 Inventory 10,000

Cash 10,000
05/11/X1 Cash 15,000
Sales 15,000
Cost of good sold 10,000
Inventory 10,000

8
DOWNSTREAM SALE OF INVENTORY

Elimination on December 31, 20X1:

Special Elimination
Peerless Consolidated
Food Debit Credit
Sales (10.000) (15.000) 10.000 - (15.000)
COGS 7.000 10.000 - 10.000 7.000

9
Consolidation Worksheet — 20X1 (Equity Method)

Special Consolidation Entries

Income Statement Peerless Foods Debit Credit Consolidated
Sales (400.000) (200.000) 10.000 (590.000)
Less: COGS 170.000 115.000 10,.000 275.000
Less: DepreciationExpense 50.000 20.000 70.000
Less: Other Expenses 40.000 15.000 55.000
Income from Special Foods (40.000) 40.000 -
Consolidated Net Income (180.000) (50.000) 50.000 10.000 (190.000)
NCI in Net Income 10.000 10.000
Controlling Interest Net Income (180.000) (50.000) 60.000 10.000 (180.000)
Statement of Retained Earnings
Beginning Balance (300.000) (100.000) 100.000 (300.000)
Net Income (180.000) (50.000) 60.000 10.000 (180.000)
Less: Dividends Declared 60.000 30.000 30.000 60.000
Ending Balance (420.000) (120.000) 160.000 40.000 (420.000)

10
Consolidation Worksheet — 20X1 (Equity Method)

Special Consolidation Entries

Statement of Financial Position Peerless Foods Debit Credit Consolidated
Cash 264.000 75.000 339.000
Accounts Receivable 75.000 50.000 125.000
Inventory 100.000 75.000 175.000
Investment in Special Foods 256.000 - 256.000 -
Land 175.000 40.000 215.000
Buildings & Equipment 800.000 600.000 300.000 1.100.000
Less: Accumulated Depreciation (450.000) (320.000) 300.000 (470.000)
Total Assets 1.220.000 520.000 300.000 556.000 1.484.000
Accounts Payable (100.000) (100.000) (200.000)
Bonds Payable (200.000) (100.000) (300.000)
Common Stock (500.000) (200.000) 200.000 (500.000)
Retained Earnings (420.000) (120.000) 160.000 40.000 (420.000)
NCI in NA of Special Foods - - 64.000 (64.000)
Total Liabilities & Equity (1.220.000) (520.000) 360.000 104.000 (1.484.000)

11
Consolidation Worksheet — 20X1 (Cost Method)

Special Consolidation Entries

Income Statement Peerless Foods Debit Credit Consolidated
Sales (400.000) (200.000) 10.000 (590.000)
Less: COGS 170.000 115.000 10,.000 275.000
Less: DepreciationExpense 50.000 20.000 70.000
Less: Other Expenses 40.000 15.000 55.000
Dividend Income (24.000) 24.000 -
Consolidated Net Income (164.000) (50.000) 34.000 10.000 (190.000)
NCI in Net Income 10.000 10.000
Controlling Interest Net Income (164.000) (50.000) 44.000 10.000 (180.000)
Statement of Retained Earnings
Beginning Balance (300.000) (100.000) 100.000 (300.000)
Net Income (164.000) (50.000) 44.000 10.000 (180.000)
Less: Dividends Declared 60.000 30.000 30.000 60.000
Ending Balance (404.000) (120.000) 144.000 40.000 (420.000)

12
Consolidation Worksheet — 20X1 (Cost Method)

Special Consolidation Entries

Statement of Financial Position Peerless Foods Debit Credit Consolidated
Cash 264.000 75.000 339.000
Accounts Receivable 75.000 50.000 125.000
Inventory 100.000 75.000 175.000
Investment in Special Foods 240.000 - 240.000 -
Land 175.000 40.000 215.000
Buildings & Equipment 800.000 600.000 300.000 1.100.000
Less: Accumulated Depreciation (450.000) (320.000) 300.000 (470.000)
Total Assets 1.204.000 520.000 300.000 540.000 1.484.000
Accounts Payable (100.000) (100.000) (200.000)
Bonds Payable (200.000) (100.000) (300.000)
Common Stock (500.000) (200.000) 200.000 (500.000)
Retained Earnings (404.000) (120.000) 144.000 40.000 (420.000)
NCI in NA of Special Foods - - 64.000 (64.000)
Total Liabilities & Equity (1.204.000) (520.000) 344.000 104.000 (1.484.000)

13
Consolidation Worksheet — 20X1 (Equity Method)
- another approach
Special Consolidation Entries
Peerless Foods Dr Cr Consolidated
Sales (400.000) (200.000) 10.000 (590.000)
Income from Special Foods (40.000) - 40.000 -
Cost of good sold 170.000 115.000 10.000 275.000
Depreciation Expense 50.000 20.000 70.000
Other Expenses 40.000 15.000 55.000
Dividends Declared 60.000 30.000 30.000 60.000
Cash 264.000 75.000 339.000
Accounts Receivable 75.000 50.000 125.000
Inventory 100.000 75.000 175.000
Investment in Special Foods 256.000 - 24.000 280.000 -
Land 175.000 40.000 215.000
Buildings & Equipment 800.000 600.000 300.000 1.100.000
Accumulated Depreciation (450.000) (320.000) 300.000 (470.000)
Accounts Payable (100.000) (100.000) (200.000)
Bonds Payable (200.000) (100.000) (300.000)
Common Stock (500.000) (200.000) 200.000 (500.000)
Retained Earnings (beginning) (300.000) (100.000) 100.000 (300.000)
Non Controlling Interest - - 6.000 60.000 (54.000)
- - 680.000 680.000 -

14
Consolidation Entries (Eliminations)
Common stock 200,000 -
Retained earning (beginning) 100,000 -
Investment in SF stock - 240,000
Non controlling interest - 60,000

Income from SF 40,000 -

Investment in SF stock - 40,000

Investment in SF stock 24,000 -

Non controlling interest 6,000 -
Dividend declared - 30,000

Accumulated depreciation 300,000 -

Building & Equipment - 300,000

Sales 10,000 -
Cost of good sold - 10,000

15
Consolidation Worksheet — 20X1 (Cost Method)
- another approach
Special Consolidation Entries
Peerless Foods Dr Cr Consolidated
Sales (400.000) (200.000) 10.000 (590.000)
Dividend Income (24.000) - 24.000 -
Cost of good sold 170.000 115.000 10.000 275.000
Depreciation Expense 50.000 20.000 70.000
Other Expenses 40.000 15.000 55.000
Dividends Declared 60.000 30.000 30.000 60.000
Cash 264.000 75.000 339.000
Accounts Receivable 75.000 50.000 125.000
Inventory 100.000 75.000 175.000
Investment in Special Foods 240.000 - 240.000 -
Land 175.000 40.000 215.000
Buildings & Equipment 800.000 600.000 300.000 1.100.000
Accumulated Depreciation (450.000) (320.000) 300.000 (470.000)
Accounts Payable (100.000) (100.000) (200.000)
Bonds Payable (200.000) (100.000) (300.000)
Common Stock (500.000) (200.000) 200.000 (500.000)
Retained Earnings (beginning) (300.000) (100.000) 100.000 (300.000)
Non Controlling Interest - - 6.000 60.000 (54.000)
- - 640.000 640.000 -

16
Consolidation Entries (Eliminations)
Common stock 200,000 -
Retained earning (beginning) 100,000 -
Investment in SF stock - 240,000
Non controlling interest - 60,000

Dividend income 24,000 -

Non controlling interest 6,000 -
Dividend declared - 30,000

Accumulated depreciation 300,000 -

Building & Equipment - 300,000

Sales 10,000 -
Cost of good sold - 10,000

17
 Peerless & Subsidiary
Consolidated Income Statement & Retained Earning
Year 20X1
Sales 590,000
Cost of good sold (275,000)
Depreciation expense (70,000)
Other expenses (55,000)
Net profit 190,000
Net profit attributed to:
Controlling interest 180,000
Non controlling interest 10,000

Retained earning (beginning) 300,000

Net profit 180,000
Dividend declared (60,000)
Retained earning (ending) 420,000

18
 Peerless & Subsidiary
Consolidated Statement of Financial Position
Dec 31, 20X1
Assets: Liabilities:
Cash 339,000 Accounts Payable 200,000
Accounts Receivable 125,000 Bonds Payable 300,000
Inventory 175,000 Equity:
Land 215,000 Common Stock 500,000
Buildings & Equipment 1,100,000 Retained Earnings 420,000
Accumulated Depreciation (470,000) Non Controlling Interest 64,000

Total Assets 1,484,000 Total Liabilities & Equity 1,484,000

19
DOWNSTREAM SALE OF INVENTORY
• Peerless Products Corporation purchases 80 percent of Special Foods Inc.’s stock on
December 31, 20X0, at the stock’s book value of $240,000. The fair value of Special Foods’
non controlling interest on that date is $60,000, the book value of those shares.
• On April, 20X1, Peerless sale inventory to Special Foods for $10,000. Cost of the inventory
is $7,000
• On January 2, 20X2, Special Foods sells the inventory purchased from Peerless to a
nonaffiliated party for $15,000.
• During 20X1, Peerless reports separate income of $140,000 income from regular
operations and declares dividends of $60,000. Special Foods reports net income of
$50,000 and declares dividends of $30,000.

• 20X1 Realized intercompany profit = ?? 0

• 20X1 Unrealized intercompany profit = ?? 3,000
• 20X1 Consolidated profit = ?? 187,000

20
Journal in Peerless’s Books:

Equity method Cost Method

31/12/X0 Investment in SF stock 240,000 31/12/X0 Investment in SF stock 240,000

Cash 240,000 Cash 240,000
01/04/X1 Cash 10,000 01/04/X1 Cash 10,000
Sales 10,000 Sales 10,000
Cost of good sold 7,000 Cost of good sold 7,000
Inventory 7,000 Inventory 7,000
31/12/X1 Investment in SF stock 40,000 31/12/X1 NO ENTRIES
Income from SF 40,000
Cash 24,000 Cash 24,000
Investment in SF stock 24,000 Dividend income 24,000

Jika Full equity method

31/12/X1 Income from SF 3,000
Investment in SF stock 3,000
02/01/X2 Investment in SF stock 3,000
Income from SF 3,000

21
Journal in Special Food’s Books:

01/04/X1 Inventory 10,000

Cash 10,000
02/01/X2 Cash 15,000
Sales 15,000
Cost of good sold 10,000
Inventory 10,000

22
DOWNSTREAM SALE OF INVENTORY

Elimination on December 31, 20X1:

Special Elimination
Peerless Consolidated
Food Debit Credit
Sales (10.000) - 10.000 - 0
COGS 7.000 - - 7.000 0
Inventory - 10.000 - 3.000 7.000

23
Consolidation Worksheet — 20X1 (Equity method)

Special Consolidation Entries

Income Statement Peerless Foods Debit Credit Consolidated
Sales (400.000) (200.000) 10.000 (590.000)
Less: COGS 170.000 115.000 7.000 278.000
Less: DepreciationExpense 50.000 20.000 70.000
Less: Other Expenses 40.000 15.000 55.000
Income from Special Foods (40.000) 40.000 -
Consolidated Net Income (180.000) (50.000) 50.000 7.000 (187.000)
NCI in Net Income 10.000 10.000
Controlling Interest Net Income (180.000) (50.000) 60.000 7.000 (177.000)
Statement of Retained Earnings
Beginning Balance (300.000) (100.000) 100.000 (300.000)
Net Income (180.000) (50.000) 60.000 7.000 (177.000)
Less: Dividends Declared 60.000 30.000 30.000 60.000
Ending Balance (420.000) (120.000) 160.000 37.000 (417.000)

24
Consolidation Worksheet — 20X1 (Equity method)

Special Consolidation Entries

Statement of Financial Position Peerless Foods Debit Credit Consolidated
Cash 264.000 75.000 339.000
Accounts Receivable 75.000 50.000 125.000
Inventory 100.000 75.000 3.000 172.000
Investment in Special Foods 256.000 - 256.000 -
Land 175.000 40.000 215.000
Buildings & Equipment 800.000 600.000 300.000 1.100.000
Less: Accumulated Depreciation (450.000) (320.000) 300.000 (470.000)
Total Assets 1.220.000 520.000 300.000 559.000 1.481.000
Accounts Payable (100.000) (100.000) (200.000)
Bonds Payable (200.000) (100.000) (300.000)
Common Stock (500.000) (200.000) 200.000 (500.000)
Retained Earnings (420.000) (120.000) 160.000 37.000 (417.000)
NCI in NA of Special Foods - - 64.000 (64.000)
Total Liabilities & Equity (1.220.000) (520.000) 360.000 101.000 (1.481.000)

25
Consolidation Worksheet — 20X1 (Full adjusted equity
method)

Special Consolidation Entries

Income Statement Peerless Foods Debit Credit Consolidated
Sales (400.000) (200.000) 10.000 (590.000)
Less: COGS 170.000 115.000 7.000 278.000
Less: DepreciationExpense 50.000 20.000 70.000
Less: Other Expenses 40.000 15.000 55.000
Income from Special Foods (37.000) 37.000 -
Consolidated Net Income (177.000) (50.000) 47.000 7.000 (187.000)
NCI in Net Income 10.000 10.000
Controlling Interest Net Income (177.000) (50.000) 57.000 7.000 (177.000)
Statement of Retained Earnings
Beginning Balance (300.000) (100.000) 100.000 (300.000)
Net Income (177.000) (50.000) 57.000 7.000 (177.000)
Less: Dividends Declared 60.000 30.000 30.000 60.000
Ending Balance (417.000) (120.000) 157.000 37.000 (417.000)

26
Consolidation Worksheet — 20X1 (Full adjusted equity
method)

Special Consolidation Entries

Statement of Financial Position Peerless Foods Debit Credit Consolidated
Cash 264.000 75.000 339.000
Accounts Receivable 75.000 50.000 125.000
Inventory 100.000 75.000 3.000 172.000
Investment in Special Foods 253.000 - 253.000 -
Land 175.000 40.000 215.000
Buildings & Equipment 800.000 600.000 300.000 1.100.000
Less: Accumulated Depreciation (450.000) (320.000) 300.000 (470.000)
Total Assets 1.217.000 520.000 300.000 556.000 1.481.000
Accounts Payable (100.000) (100.000) (200.000)
Bonds Payable (200.000) (100.000) (300.000)
Common Stock (500.000) (200.000) 200.000 (500.000)
Retained Earnings (417.000) (120.000) 157.000 37.000 (417.000)
NCI in NA of Special Foods - - 64.000 (64.000)
Total Liabilities & Equity (1.217.000) (520.000) 357.000 101.000 (1.481.000)

27
Consolidation Worksheet — 20X1 (Cost Method)

Special Consolidation Entries

Income Statement Peerless Foods Debit Credit Consolidated
Sales (400.000) (200.000) 10.000 (590.000)
Less: COGS 170.000 115.000 7,.000 278.000
Less: DepreciationExpense 50.000 20.000 70.000
Less: Other Expenses 40.000 15.000 55.000
Dividend Income (24.000) 24.000 -
Consolidated Net Income (164.000) (50.000) 34.000 7.000 (187.000)
NCI in Net Income 10.000 10.000
Controlling Interest Net Income (164.000) (50.000) 44.000 7.000 (177.000)
Statement of Retained Earnings
Beginning Balance (300.000) (100.000) 100.000 (300.000)
Net Income (164.000) (50.000) 44.000 7.000 (177.000)
Less: Dividends Declared 60.000 30.000 30.000 60.000
Ending Balance (404.000) (120.000) 144.000 37.000 (417.000)

28
Consolidation Worksheet — 20X1 (Cost Method)

Special Consolidation Entries

Statement of Financial Position Peerless Foods Debit Credit Consolidated
Cash 264.000 75.000 339.000
Accounts Receivable 75.000 50.000 125.000
Inventory 100.000 75.000 3,000 172.000
Investment in Special Foods 240.000 - 240.000 -
Land 175.000 40.000 215.000
Buildings & Equipment 800.000 600.000 300.000 1.100.000
Less: Accumulated Depreciation (450.000) (320.000) 300.000 (470.000)
Total Assets 1.204.000 520.000 300.000 540.000 1.481.000
Accounts Payable (100.000) (100.000) (200.000)
Bonds Payable (200.000) (100.000) (300.000)
Common Stock (500.000) (200.000) 200.000 (500.000)
Retained Earnings (404.000) (120.000) 144.000 37.000 (417.000)
NCI in NA of Special Foods - - 64.000 (64.000)
Total Liabilities & Equity (1.204.000) (520.000) 344.000 104.000 (1.481.000)

29
Consolidation Worksheet — 20X2 (Full adjusted equity
method)

Special Consolidation Entries

Income Statement Peerless Foods Debit Credit Consolidated
Sales (450.000) (300.000) (750.000)
Less: COGS 180.000 160.000 3.000 337.000
Less: DepreciationExpense 50.000 20.000 70.000
Less: Other Expenses 60.000 45.000 105.000
Income from Special Foods (63.000) 63.000 -
Consolidated Net Income (223.000) (75.000) 63.000 3.000 (238.000)
NCI in Net Income 15.000 15.000
Controlling Interest Net Income (223.000) (75.000) 78.000 3.000 (223.000)
Statement of Retained Earnings
Beginning Balance (417.000) (120.000) 120.000 (417.000)
Net Income (223.000) (75.000) 78.000 3.000 (223.000)
Less: Dividends Declared 60.000 40.000 40.000 60.000
Ending Balance (580.000) (155.000) 198.000 43.000 (580.000)

30
Consolidation Worksheet — 20X2 (Full adjusted equity
method)

Special Consolidation Entries

Statement of Financial Position Peerless Foods Debit Credit Consolidated
Cash 291.000 85.000 376.000
Accounts Receivable 150.000 80.000 230.000
Inventory 180.000 90.000 270.000
Investment in Special Foods 284.000 - 3.000 287.000 -
Land 175.000 40.000 215.000
Buildings & Equipment 800.000 600.000 300.000 1.100.000
Less: Accumulated Depreciation (500.000) (340.000) 300.000 (540.000)
Total Assets 1.380.000 555.000 303.000 587.000 1.651.000
Accounts Payable (100.000) (100.000) (200.000)
Bonds Payable (200.000) (100.000) (300.000)
Common Stock (500.000) (200.000) 200.000 (500.000)
Retained Earnings (580.000) (155.000) 198.000 43.000 (580.000)
NCI in NA of Special Foods - - 71.000 (71.000)
Total Liabilities & Equity (1.380.000) (555.000) 398.000 114.000 (1.651.000)

31
UPSTREAM SALE OF INVENTORY
• Peerless Products Corporation purchases 80 percent of Special Foods Inc.’s stock on
December 31, 20X0, at the stock’s book value of $240,000. The fair value of Special Foods’
non controlling interest on that date is $60,000, the book value of those shares.
• On April, 20X1, Special Foods sale inventory to Peerless for $10,000. Cost of the inventory
is $7,000
• On January 2, 20X2, Peerless sells the inventory purchased from Special Foods to a
nonaffiliated party for $15,000.
• During 20X1, Peerless reports separate income of $140,000 income from regular
operations and declares dividends of $60,000. Special Foods reports net income of
$50,000 and declares dividends of $30,000.

• 20X1 Realized intercompany profit = ?? 0

• 20X1 Unrealized intercompany profit = ?? 3,000
• 20X1 Consolidated profit = ?? 187,000

32
Journal in Peerless’s Books:

Equity method Cost Method

31/12/X0 Investment in SF stock 240,000 31/12/X0 Investment in SF stock 240,000

Cash 240,000 Cash 240,000
01/04/X1 Inventory 10,000 01/04/X1 Inventory 10,000
Cash 10,000 Cash 10,000
31/12/X1 Investment in SF stock 40,000 31/12/X1 Cash 24,000
Income from SF 40,000 Dividend income 24,000
Cash 24,000
Investment in SF stock 24,000

Jika Full equity method

31/12/X1 Income from SF 2,400
Investment in SF stock 2,400
02/01/X2 Investment in SF stock 2,400
Income from SF 2,400

33
Journal in Special Food’s Books:

01/04/X1 Cash 10,000

Sales 10,000
Cost of good sold 7,000
Inventory 7,000

34
Consolidation Worksheet — 20X1 (Equity method)

Special Consolidation Entries

Income Statement Peerless Foods Debit Credit Consolidated
Sales (400.000) (200.000) 10.000 (590.000)
Less: COGS 170.000 115.000 7.000 278.000
Less: DepreciationExpense 50.000 20.000 70.000
Less: Other Expenses 40.000 15.000 55.000
Income from Special Foods (40,000) 40,000 -
Consolidated Net Income (180,000) (50.000) 50,000 7.000 (187.000)
NCI in Net Income 9,400 9,400
Controlling Interest Net Income (180,000) (50.000) 59,400 7.000 (177.600)
Statement of Retained Earnings
Beginning Balance (300.000) (100.000) 100.000 (300.000)
Net Income (180,000) (50.000) 59,400 7.000 (177.600)
Less: Dividends Declared 60.000 30.000 30.000 60.000
Ending Balance (420,000) (120.000) 159,400 37.000 (417.600)

35
Consolidation Worksheet — 20X1 (Equity method)

Special Consolidation Entries

Statement of Financial Position Peerless Foods Debit Credit Consolidated
Cash 264.000 75.000 339.000
Accounts Receivable 75.000 50.000 125.000
Inventory 100.000 75.000 3.000 172.000
Investment in Special Foods 256,000 - 256,000 -
Land 175.000 40.000 215.000
Buildings & Equipment 800.000 600.000 300.000 1.100.000
Less: Accumulated Depreciation (450.000) (320.000) 300.000 (470.000)
Total Assets 1.220,000 520.000 300.000 559,000 1.481.000
Accounts Payable (100.000) (100.000) (200.000)
Bonds Payable (200.000) (100.000) (300.000)
Common Stock (500.000) (200.000) 200.000 (500.000)
Retained Earnings (420.000) (120.000) 159,400 37.000 (417.600)
NCI in NA of Special Foods - - 63,400 (63,400)
Total Liabilities & Equity (1.220,00) (520.000) 359,400 100,400 (1.481.000)

36
Consolidation Worksheet — 20X1 (Full adjusted equity
method)

Special Consolidation Entries

Income Statement Peerless Foods Debit Credit Consolidated
Sales (400.000) (200.000) 10.000 (590.000)
Less: COGS 170.000 115.000 7.000 278.000
Less: DepreciationExpense 50.000 20.000 70.000
Less: Other Expenses 40.000 15.000 55.000
Income from Special Foods (37.600) 37.600 -
Consolidated Net Income (177.600) (50.000) 47.600 7.000 (187.000)
NCI in Net Income 9,400 9,400
Controlling Interest Net Income (177.600) (50.000) 57.000 7.000 (177.600)
Statement of Retained Earnings
Beginning Balance (300.000) (100.000) 100.000 (300.000)
Net Income (177.600) (50.000) 57.000 7.000 (177.600)
Less: Dividends Declared 60.000 30.000 30.000 60.000
Ending Balance (417.600) (120.000) 157.000 37.000 (417.600)

37
Consolidation Worksheet — 20X1 (Full adjusted equity
method)

Special Consolidation Entries

Statement of Financial Position Peerless Foods Debit Credit Consolidated
Cash 264.000 75.000 339.000
Accounts Receivable 75.000 50.000 125.000
Inventory 100.000 75.000 3.000 172.000
Investment in Special Foods 253.600 - 253.600 -
Land 175.000 40.000 215.000
Buildings & Equipment 800.000 600.000 300.000 1.100.000
Less: Accumulated Depreciation (450.000) (320.000) 300.000 (470.000)
Total Assets 1.217.600 520.000 300.000 556.600 1.481.000
Accounts Payable (100.000) (100.000) (200.000)
Bonds Payable (200.000) (100.000) (300.000)
Common Stock (500.000) (200.000) 200.000 (500.000)
Retained Earnings (417.600) (120.000) 157.000 37.000 (417.600)
NCI in NA of Special Foods - - 63,400 (63,400)
Total Liabilities & Equity (1.217.600) (520.000) 357.000 100,400 (1.481.000)

38
Consolidation Worksheet — 20X1 (Cost Method)

Special Consolidation Entries

Income Statement Peerless Foods Debit Credit Consolidated
Sales (400.000) (200.000) 10.000 (590.000)
Less: COGS 170.000 115.000 7,.000 278.000
Less: DepreciationExpense 50.000 20.000 70.000
Less: Other Expenses 40.000 15.000 55.000
Dividend Income (24.000) 24.000 -
Consolidated Net Income (164.000) (50.000) 34.000 7.000 (187.000)
NCI in Net Income 9,400 9.400
Controlling Interest Net Income (164.000) (50.000) 43.400 7.000 (177.600)
Statement of Retained Earnings
Beginning Balance (300.000) (100.000) 100.000 (300.000)
Net Income (164.000) (50.000) 43.400 7.000 (177.600)
Less: Dividends Declared 60.000 30.000 30.000 60.000
Ending Balance (404.000) (120.000) 143.400 37.000 (417.600)

39
Consolidation Worksheet — 20X1 (Cost Method)

Special Consolidation Entries

Statement of Financial Position Peerless Foods Debit Credit Consolidated
Cash 264.000 75.000 339.000
Accounts Receivable 75.000 50.000 125.000
Inventory 100.000 75.000 3,000 172.000
Investment in Special Foods 240.000 - 240.000 -
Land 175.000 40.000 215.000
Buildings & Equipment 800.000 600.000 300.000 1.100.000
Less: Accumulated Depreciation (450.000) (320.000) 300.000 (470.000)
Total Assets 1.204.000 520.000 300.000 540.000 1.481.000
Accounts Payable (100.000) (100.000) (200.000)
Bonds Payable (200.000) (100.000) (300.000)
Common Stock (500.000) (200.000) 200.000 (500.000)
Retained Earnings (404.000) (120.000) 143.400 37.000 (417.600)
NCI in NA of Special Foods - - 63.400 (63.400)
Total Liabilities & Equity (1.204.000) (520.000) 343.400 100.400 (1.481.000)

40
 Peerless & Subsidiary
Consolidated Income Statement & Retained Earning
Year 20X1
Sales 590,000
Cost of good sold (278,000)
Depreciation expense (70,000)
Other expenses (55,000)
Net profit 187,000
Net profit attributed to:
Controlling interest 177,600
Non controlling interest 9,400

Retained earning (beginning) 300,000

Net profit 177,600
Dividend declared (60,000)
Retained earning (ending) 417,600

41
 Peerless & Subsidiary
Consolidated Statement of Financial Position
Dec 31, 20X1
Assets: Liabilities:
Cash 339,000 Accounts Payable 200,000
Accounts Receivable 125,000 Bonds Payable 300,000
Inventory 172,000 Equity:
Land 215,000 Common Stock 500,000
Buildings & Equipment 1,100,000 Retained Earnings 417,600
Accumulated Depreciation (470,000) Non Controlling Interest 63,400

Total Assets 1,481,000 Total Liabilities & Equity 1,481,000

42
Consolidation Worksheet — 20X2 (Full adjusted equity
method)

Special Consolidation Entries

Income Statement Peerless Foods Debit Credit Consolidated
Sales (450.000) (300.000) (750.000)
Less: COGS 180.000 160.000 3.000 337.000
Less: DepreciationExpense 50.000 20.000 70.000
Less: Other Expenses 60.000 45.000 105.000
Income from Special Foods (62,400) 62,400 -
Consolidated Net Income (222.400) (75.000) 62,400 3.000 (238.000)
NCI in Net Income 15.600 15.600
Controlling Interest Net Income (222,400) (75.000) 78.000 3.000 (222,400)
Statement of Retained Earnings
Beginning Balance (417.600) (120.000) 120.000 (417.600)
Net Income (222,400) (75.000) 78.000 3.000 (222,400)
Less: Dividends Declared 60.000 40.000 40.000 60.000
Ending Balance (580.000) (155.000) 198.000 43.000 (580.000)

43
Consolidation Worksheet — 20X2 (Full adjusted equity
method)

Special Consolidation Entries

Statement of Financial Position Peerless Foods Debit Credit Consolidated
Cash 291.000 85.000 376.000
Accounts Receivable 150.000 80.000 230.000
Inventory 180.000 90.000 270.000
Investment in Special Foods 284.000 - 2,400 286,400 -
Land 175.000 40.000 215.000
Buildings & Equipment 800.000 600.000 300.000 1.100.000
Less: Accumulated Depreciation (500.000) (340.000) 300.000 (540.000)
Total Assets 1.380.000 555.000 302,400 586,400 1.651.000
Accounts Payable (100.000) (100.000) (200.000)
Bonds Payable (200.000) (100.000) (300.000)
Common Stock (500.000) (200.000) 200.000 (500.000)
Retained Earnings (580.000) (155.000) 198.000 43.000 (580.000)
NCI in NA of Special Foods - - 600 71.600 (71.000)
Total Liabilities & Equity (1.380.000) (555.000) 398.600 114.600 (1.651.000)

44