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2010-10-04 005733 Chapter 7
2010-10-04 005733 Chapter 7
Part A 2011
(1) Equipment ($300,000 - $200,000) 100,000
Gain on Sale of Equipment 50,000
Accumulated Depreciation($300,000)(5/10) 150,000
Part B Controlling interest in Consolidated Net Income for 2012 = $150,000 + .9($100,000 + $10,000) = $249,000
Chapter 7 Exercise 7 On January 1, 2010, Price Company acquired an 80% interest in the common stock of Smith Company on the
open market for $750,000, the book value at that date. On January 1,2011, Price Company purchased new equipment for $14,500 from
Smith Company. The equipment cost $9,000 and had an estimate life of five years as of January 1, 2011. During 2012, Price Company
had merchandise sales to Smith Company of $100,000; the merchandise was priced at 25% above Price Company’s cost. Smith
Company still owes Price Company $17,500 on open account and has 20% of this merchandise in inventory at December 31, 2012. At
the beginning of 2012, Smith Company had an inventory $25,000 of merchandise purchased in the previous period from Price
Company. A. Prepare all workpaper entries necessary to eliminate the effects of the intercompany sales on the consolidated financial
statements for the year ended December 31, 2012. B. Assume that Smith Company reports net income of $40,000 for the year ended
December 31, 2012. Calculate the amount of noncontrolling interest to be deducted from consolidated income in the consolidated
income statement for the year ended December 31, 2012.
Chapter 7 Problem 14 Platt Company acquired an 80% interest in Sloane Company when the retained earnings of Sloane Company
were $300,000. On January 1, 2011, Sloane Company recorded a $250,000 gain on the sale to Platt Company of equipment with a
remaining life of five years. On January 1, 2012, Platt Company recorded a $180,000 gain on the sale to Sloane Company of
equipment with a remaining life of six years. Sloane Company reported net income of $180,000 and declared dividends of 60,000 in
2012. It reported retained earnings of $520,000 on January 1, 2012, and $640,000 on December 31, 2012. Platt Company reported net
income from independent operations of $400,000 in 2012 and retained earnings of $1,800,000 on December 31, 2012. A. Prepare in
general journal form the entries necessary in the December 31, 2012, consolidated statements workpaper to eliminate the effects of the
intercompany sales. B. Calculate controlling interest in consolidated net income for the year ended December 31, 2012. C. Calculate
consolidated retained earnings on December 31, 2012. D. Calculate noncontrolling interest in consolidated income for the year ended
December 31, 2012.
Part A.
(1) Gain on Sale of Equipment 180,000
Equipment (net) 180,000
To eliminate unrealized profit recorded on intercompany sale of
equipment and reduce the carrying value on date of sale.
Part A
PADILLA COMPANY AND SUBSIDIARY
Consolidated Statements Workpaper
For the Year Ended December 31, 2013
Net Income from above 327,050 178,500 554,217 392,000 16,283 327,050
Dividends Declared
Padilla Company (100,000) (100,000)
Sanchez Company (60,000) (1) 54,000 (6,000)
12/31 Retained earnings
to Balance Sheet 818,250 258,000 693,717 446,000 10,283 818,250