Solution P5-3

1. Inventories appearing in consolidated balance sheet at December 31, 2017

Beginning inventory — Pot ($120,000 - $8,000a) $112,000

Beginning inventory — San ($77,500 - $15,500b) 62,000
Beginning inventory — Tay ($48,000 - 0) 48,000
Inventories December 31 $222,000

Intercompany profit:

a Pot:
Inventory acquired intercompany ($120,000 x 40%) $ 48,000
Cost of intercompany inventory ($48,000/1.2) (40,000)
Unrealized profit in Pot's inventory $ 8,000

b San:
Inventory acquired intercompany ($77,500 x 100%) $ 77,500
Cost of intercompany inventory ($77,500/1.25) (62,000)
Unrealized profit in San's inventory $ 15,500

2. Inventories appearing in consolidated balance sheet at December 31, 2018

Ending inventory — Pot ($108,000 - $9,000c) $ 99,000

Ending inventory — San ($62,500 - $12,500d) 50,000
Ending inventory — Tay ($72,000 - 0) 72,000
Inventories December 31 $221,000

Intercompany profit:
c Pot:
Inventory acquired intercompany ($108,000 x 50%) $ 54,000
Cost of intercompany inventory ($54,000/1.2) (45,000)
Unrealized profit in Pot's inventory $ 9,000

d San:
Inventory acquired intercompany ($62,500 x 100%) $ 62,500
Cost of intercompany inventory ($62,500/1.25) (50,000)
Unrealized profit in San's inventory $ 12,500
 Solution P5-7

Pam Corporation and Subsidiary

Consolidation Workpapers
for the year ended December,31 2017

Pam Sun 90% Adjustments and Consolidated

Eliminations Statements

Income Statement
a
Sales $ 8,190 5,600 5,600 $ 8,190
d
Income from Sun 864 864
b a
Cost of sales 5,460* 4000* 120 5600 3,900*
c
80

Other Expense 1,544* 600* 2,144*

Consolidated net income $ 2,146

f
Noncontrolling int.share 96 96*

Controlling share of NI $ 2,050 $ 1,000 $ 2,050

Retained Earnings Retained earnings $ 1,250 $ 1,250

e
Retained earnings — San $ 700 700

Controlling share of NI 2,050 1,000 2,050

d
Dividends 1,000* 500* 450 1,000*
f
50

Retained earnings December 31 $ 2,300 $ 1,200 $ 2,300

Balance Sheet Cash $ 758 $ 500 $ 1,258

b
Inventory 420 800 120 1,100
g
Other current assets 600 200 100 700

Plant assets — net 3,000 3,000 6,000

 c d
Investment in San 3,222 72 414
e
2880
e
Goodwill 500 500

$ 8,000 $ 4,500 $ 9,558

g
Current liabilities $ 1,700 $ 1,300 100 $ 2,900
e
Capital stock 4,000 2,000 2,000 4,000

Retained earnings 2,300 1,200 2,300

$ 8,000 $ 4,500
c e
Non Controlling Interest January, 1 8 320

$ 9,558

* Deduction

Solution P 3-8

Pop Corporation and Subsidiary

Consolidation Workpapers
for the year ended December 31, 2017

Pop Sun Adjustment and Consolidation

100% elimination Statements

Income Statements
a
Sales $ 800 $ 400 120 $ 1,080
d
Income from Son 108 108
b a
Cost of sales 400* 200* 12 120 472*
c
20

Depreciation expense 110* 40* 150*

Other expenses 192* 60* 252*

Net Income $ 206 $ 100 $ 206

Retained Earnings - Pop $ 606 606

e
Retained Earnings - Son $ 380 380

Net Income 206 100 206

d
Dividends 100* 50* 50 100*

Retained earnings

December 31 $ 712 $ 430 $ 712

Balance Sheet

Cash $ 54 $ 37 $ 91
f
Receivables - net 90 60 17 133
b
Inventories 100 80 12 168

Other assets 70 90 160

Land 50 50 100

Buildings - net 200 150 350

Equipment - net 500 400 900

c d
Investment in Son 748 20 58
e
710
e
Goodwill 30 30

$ 1,812 $ 867 $ 1,932

f
Accounts payable $ 160 $ 47 17 $ 190

Other liabilities 34 90 430

e
Common stock, $10 par 600 300 300 600

Retained earnings 712 430 712

$ 1,812 $ 867 $ 1,932

Supporting Computations

Unealized Profit in beginning inventory ($40,000 × 1/2) = 20,000

Unrealized profit in ending inventory = ($ 48,000 x 1/4) = $ 12,000

Son's income of $100,000 + $ 20,000 profit in beginning inventory

less profit in ending inventory equals income from Son $ 108,000