Exercise 7-2

On January 1, 2014, Polar Company, which owns an 80% interest in Superior Company, sold Superior Company equipment wit

Polar Company reported net income from its independent operations (including sales to affiliates) of $363,800, and Superior C

Required:
Calculate the controlling interest in consolidated net income for the years ended December 31, 2014, and December 31, 2015

Controlling interest in combined net income for the year ended December 31,2014:
Gain to P from the sale of equipment = (560,000 – 400,000) = 160,000
Depreciation charged on gain per year = (Gain/ Useful life) = (160,000/8) =20,000
i = 80% of net income p + (net income s - Gain + Depreciation)
= 0.8 x 200,000 + (400,000 – 160,000 +20,000) = 420,000

Controlling interest in combined net income for the year ended December 31,2014:
i = 80% of net income p + (net income s + Depreciation) =0.8 x 200,000 + (400,000 +20,000) = 580,000

Solution:
2014
income of Polar company realized $ 232,900
P share in S income 148,080
Controlling Interest in Consolidated Net Income $ 380,980

2014 2015
Controlling Interest in Consolidated Net Income $ 380,980 $ 530,580

2015
income of Polar company realized $ 382,500
P share in S income 148,080
Controlling Interest in Consolidated Net Income $ 530,580
old Superior Company equipment with a book value of $390,000 for $539,600. The equipment had an estimated remaining useful life of ei

affiliates) of $363,800, and Superior Company reported net income of $185,100 from its independent operations in 2014 and 2015.

ber 31, 2014, and December 31, 2015.

539,600 390,000 $ 149,600 Gain

$ 149,600 8 $ 18,700 Dep. Per year

148080 259,100 407,180

00) = 580,000

148080 408,700 556,780

ed remaining useful life of eight years on the date of the intercompany sale.

ons in 2014 and 2015.

Exercise 7-8
On January 1, 2015, P Company acquired a 90% interest in S Company. During 2016, S Company sold merchandise to P Compa

On January 1, 2016, P Company sold equipment that had a book value of $74,300 to S Company for $126,900. The equipment

S Company reported net income of $117,300, and P Company reported net income of $276,900 from their independent opera

Calculate controlling interest in consolidated net income for the year ended December 31, 2016.

P S
Net Income $ 276,900 117,300
bv fv yr
$ 74,300 $ 126,900 4 $ 13,150
Gain $ (52,600)
P company income (276900-52600+13150)= $ 237,450 2015
P company share of income of S company (0.9 × (117,300-15,300)= 91,800
Controlling interest in consolidated net income $ 329,250

controlling interest in consolidated net income for the year ended December 31, 2016.

Solution:
2015
income of P company realized $ 316,350
P share in S income 105,570
Controlling Interest in Consolidated Net Income $ 421,920

2014
Controlling Interest in Consolidated Net Income $ 421,920

2015
income of Polar company realized $ 290,050
P share in S income 105,570
Controlling Interest in Consolidated Net Income $ 395,620 $ 560,860

Solution
Exercise 7-8
P Company’s income realized in
transactions with third parties

($276,900 − $52,600 + $13,150)

$237,450
 P Company’s share of income of S
Company realized in transactions
with third parties

(0.9 x ($117,300 - $15,300))

91,800

Controlling interest in consolidated

$329,250
net income

$126,900 − $74,300  =  $52,600

$52,600
 =  $13,150
4
$229,500 x (1/3)  =  $76,500

$76,500
$76,500 −   =  $15,300
1.25
mpany sold merchandise to P Company at 25% above cost in the amount (selling price) of $229,500. At the end of the year, P Company had

mpany for $126,900. The equipment had an estimated remaining life of four years.

6,900 from their independent operations (including sales to affiliates) for the year ended December 31, 2016.

SP 229,500 x (1/3) 76,500 Inventory

$ 76,500 (76,500÷1.25) 15,300

sp cost
229,500 x 1.25
x 183,600
0.9
P 165,240
gross profit 45,900

2015
$ 395,620
f the year, P Company had in its inventory one-third of the amount of goods purchased from S Company.
Exercise 7-11
Pinta Company, a forklift manufacturer, owns 80% of the voting stock of Standard Company. On January 1, 2014, Pinta Compa
The forklifts, which represented inventory to Pinta Company, had a cost to Pinta Company of $316,900.
The management of Standard Company estimated that the forklifts had a useful life of nine years from the date of purchase.

In 2014, Pinta Company reported $727,400 in net income from its independent operations (including sales to affiliates), and St
(a)
Prepare in general journal form the workpaper entries necessary because of the intercompany sales in:
(1) The consolidated financial statements workpaper for the year ended December 31, 2014.
 January 1, 2014, Pinta Company sold forklifts to Standard Company for $407,800.

rs from the date of purchase. Standard Company uses the straightline method to depreciate its capital assets.

uding sales to affiliates), and Standard Company reported $231,600 in net income from its operations.