Accounting

Q: Parkview Holdings owns 70% of Skyline Corporation. On January 1, 2011, Skyline acquires half of the $2,000,000 of bonds originally issued by Parkview on January 1, 2006. The bonds were issued at a stated rate of 5% for 10 years, for $1,920,000. Skyline purchased them for $950,000. Assume that both Parkview and Skyline will use the straight-line method for any bond-related amortization. Annual interest is paid on December 31.Required: Prepare the entries required for the consolidating worksheet for the years ended December 31, 2006 through December 31, 2016.

Q: Pachelor Corporation owns 70% of the outstanding stock of Stabb Company. On January 1, 2010, Stabb issued $1,000,000 in 7% bonds that matured on January 1, 2015. At the time of issuance, the bonds were sold at a discount of $125,000. At January 2, 2012, Pachelor purchased the bonds for $1,400,000, and constructively retired the debt. Interest is paid annually on January 1. Straight-line amortization is used by both companies.Required:Calculate the gain or loss that the consolidated entity incurred to retire the debt.Prepare eliminating/adjusting entries for the consolidating work papers for the year ended December 31, 2012.

Q: Popcorn Corporation owns 90% of the outstanding voting common stock of Salty Corporation. On January 1, 2005, Salty issued $1,000,000 face amount of 12%, $1,000 bonds payable at 119.20. The bonds pay interest on January 1 and July 1 of each year and mature on January 1, 2013. On July 2, 2010, Popcorn purchased all of the outstanding bonds at a price of 107.50. Both companies use straight-line amortization.Required:Prepare the journal entries for July 1, 2010 through December 31, 2010 for Popcorn Corporation.Prepare the journal entries for July 1, 2010 through December 31, 2010 for Salty Corporation.Prepare the elimination entries necessary on the consolidating working papers for the year ended December 31, 2010.

Q: There are several theories for allocating constructive gains or losses between purchasing and issuing affiliates. The Agency TheoryA) does so based on the par value of the bonds purchased.B) assigns the entire constructive gain or loss to the parent based on their control of the decision to purchase the bonds.C) assigns the entire constructive gain or loss to the subsidiary based on the need to have the noncontrolling interest share in the retirement of the debt.D) assigns the entire constructive gain or loss to whichever company issued the bonds.

Q: Use the following information to answer the question(s) below.Plenty Corporation issued six thousand, $1,000 par, 6% bonds on January 1, 2010, at par. Interest is paid on January 1 and July 1 of each year; the bonds mature on January 1, 2015. On January 2, 2012, Scrawn Corporation, a 75%-owned subsidiary of Plenty, purchased 3,000 of the bonds on the open market at 102.50. Plenty's separate net income for 2012 included the annual interest expense for all 3,000 bonds. Scrawn's separate net income for 2012 was $400,000, which included the bond interest received on July 1 as well as the accrual of bond interest revenue earned on December 31. Both companies use straight-line amortization of bond discounts/premiums.Using the original information, the amount of consolidated Interest Expense for 2012 wasA) $ 135,000.B) $ 180,000.C) $ 270,000.D) $ 360,000.

Q: Use the following information to answer the question(s) below.Pfadt Inc. had $600,000 par of 8% bonds payable outstanding on January 1, 2011 due January 1, 2015 with an unamortized discount of $12,000. Senat is a 90%-owned subsidiary of Pfadt. On January 2, 2011, Senat Corporation purchased $150,000 par value of Pfadt's outstanding bonds for $152,000. The bonds have interest payment dates of January 1 and July 1. Straight-line amortization is used.Bonds Payable appeared in the December 31, 2011 consolidated balance sheet of Pfadt Corporation and Subsidiary in the amount ofA) $398,925.B) $441,000.C) $443,250.D) $450,000.

Q: Prussia Corporation owns 80% the voting stock of Stad Corporation. On January 1, 2010, Prussia paid $391,000 cash for $400,000 par of Stad's 10% $1,000,000 par value outstanding bonds, due on April 1, 2015. Stad's bonds had a book value of $1,045,000 on January 1, 2010. Straight-line amortization is used. The gain or loss on the constructive retirement of $400,000 of Stad bonds on January 1, 2010 was reported in the 2010 consolidated income statement in the amount ofA) $14,000.B) $21,600.C) $23,000.D) $27,000.

Q: Use the following information to answer the question(s) below.Pascalian Company owns a 90% interest in Sapp Company. On January 1, 2010, Pascalian had $300,000, 6% bonds outstanding with an unamortized premium of $9,000. The bonds mature on December 31, 2014. Sapp acquired one-third of Pascalian's bonds in the open market for $97,000 on January 1, 2010. Both companies use straight-line amortization of bond discounts/premiums. Interest is paid on December 31. On December 31, 2010, the books of the two affiliates held the following balances:Pascalian's books6% bonds payable $300,000Premium on bonds 7,200Interest expense 16,200Sapp's booksInvestment in Pascalian bonds $ 97,600Interest income 6,600Consolidated Interest Expense and consolidated Interest Income, respectively, that appeared on the consolidated income statement for the year ended December 31, 2010 wasA) $10,800 and $0.B) $10,800 and $6,600.C) $0 and $0.D) $16,200 and $6,600.

Q: Bonds issued by a company remain on their books as a liability, but are considered constructively retired whenA) the company borrows money from unaffiliated entities to re-purchase its own bonds at a gain.B) The company borrows money from an affiliate to re-purchase its own bonds at a gain.C) The company's parent or subsidiary purchases the bonds from outside entities.D) The company borrows money from an affiliate to repurchase its own bonds at a gain or at a loss.

Q: If an affiliate purchases bonds in the open market, the book value of the intercompany bond liability at the time of purchase isA) always assigned to the parent company because it has control.B) the par value of the bonds less the unamortized discount or plus the unamortized premium.C) par value.D) the par value of the bonds plus the unamortized discount or less the unamortized premium.

Q: If the price paid by a parent company to acquire the debt of a subsidiary is greater than the book value of the liability, a ________ occurs.A) realized loss on the retirement of debt from the viewpoint of the subsidiaryB) realized gain on the retirement of debt from the viewpoint of the subsidiaryC) constructive loss on the retirement of debt from the viewpoint of the consolidated entityD) constructive gain on the retirement of debt from the viewpoint of the consolidated entity

Q: On January 1, 2011, Bigg Corporation sold equipment with a book value of $20,000 and a 10-year remaining useful life to its wholly-owned subsidiary, Little Corporation, for $30,000. Both Bigg and Little use the straight-line depreciation method, assuming no salvage value. On December 31, 2011, the separate company financial statements held the following balances associated with the equipment:Bigg LittleGain on sale of equipment $10,000Depreciation expense $3,000Equipment 30,000Accumulated depreciation 3,000A working paper entry to consolidate the financial statements of Bigg and Little on December 31, 2011 included aA) debit to equipment for $10,000.B) credit to gain on sale of equipment for $10,000.C) debit to accumulated depreciation for $1,000.D) credit to depreciation expense for $3,000.

Q: Use the following information to answer the question(s) below.In 2011, Parla Corporation sold land to its subsidiary, Sidd Corporation, for $38,000. It had a book value of $24,000. In the next year, Sidd sold the land for $41,000 to an unaffiliated firm.The 2011 unrealized gain from the intercompany saleA) should be recognized in consolidation in 2011 by a working paper entry.B) should be eliminated from consolidated net income by a working paper entry that credits land for $14,000.C) should be eliminated from consolidated net income by a working paper entry that debits land for $14,000.D) should be eliminated from consolidated net income by a working paper entry that credits gain on sale of land for $14,000.

Q: On January 2, 2012, Pal Corporation sold warehouse equipment to SimCo, a wholly-owned subsidiary. The equipment had an original cost of $130,000 and a net book value of $100,000 when it was sold to SimCo for $150,000. Both companies agreed that the equipment had a five-year remaining life and compute depreciation on the straight-line method. The equipment has no salvage value.Pal reported $470,000 in net income in 2012 (prior to reporting any income from SimCo), and SimCo reported $160,000 in net income.Required:1. Calculate consolidated net income for 2012.2. Determine the controlling share of net income for the year if Pal only owned 75% of SimCo.3. Determine the controlling share of net income for the year if Pal only owned 75% of SimCo AND the equipment transfer was upstream.

Q: Separate income statements of Plantation Corporation and its 90%-owned subsidiary, Savannah Corporation, for 2011 are as follows, prior to Plantation recording any income related to its subsidiary:Plantation SavannahSales Revenue $870,000 $230,000Gain on equipment 35,000Gain on land 20,000Cost of sales (470,000) (90,000)Other expenses (265,000) (60,000)Separate incomes $170,000 $100,000Additional information:1. Plantation acquired its 90% interest in Savannah Corporation when the book values were equal to the fair values.2. The gain on equipment relates to equipment with a book value of $95,000 and a 7-year remaining useful life that Plantation sold to Savannah for $130,000 on January 1, 2011. The straight-line depreciation method was used and the equipment has no salvage value.3. On January 1, 2011, Savannah sold land to an outside entity for $90,000. The land was acquired from Plantation in 2009 for $70,000. The original cost of the land to Plantation was $45,000.4. Savannah did not declare or distribute dividends in 2011.Required:1. Prepare elimination/adjusting entries on the consolidated worksheet for the year 2011.2. Prepare the consolidated income statement for the year ended December 31, 2011.

Q: Piglet Incorporated purchased 90% of the outstanding stock of Sourgrape Company several years ago at book value. At January 1, 2010, Sourgrape sold land with a book value of $30,000 to Piglet at its fair market value of $40,000. At the same time, Sourgrape sold the building that was on the land to Piglet. The building had a book value of $80,000 and was sold at its fair value of $120,000. The building had a remaining useful life of 8 years and is depreciated using the straight-line method. The building has no salvage value. On January 1, 2012, Piglet sold the land and building to a third party. The sales price was allocated so that the land was sold for $50,000 and the building was sold for $150,000. Income statements for Piglet and Sourgrape for the year ended December 31, 2012 are summarized below:Piglet SourgrapeSales $252,000 $90,000Gain on sale of land and building 40,000Cost of sales (140,000) (40,000)Depreciation expense (60,000) (20,000)Other expenses (20,000) (10,000)Net income $72,000 $20,000Required:Prepare the eliminating/adjusting entries related to the land and building on the consolidated working papers on the following dates:1. December 31, 20102. December 31, 20113. December 31, 2012

Q: Prey Corporation created a wholly owned subsidiary, Sage Corporation, on January 1, 2010, at which time Prey sold land with a book value of $90,000 to Sage at its fair market value of $140,000. Also, on January 1, 2010, Prey sold to Sage equipment with a book value of $130,000 and a selling price of $165,000. The equipment had a remaining useful life of 4 years and is being depreciated under the straight-line method. The equipment has no salvage value. On January 1, 2012, Sage resold the land to an outside entity for $150,000. Sage continues to use the equipment purchased from Prey. Income statements for Prey and Sage for the year ended December 31, 2012 are summarized below:Prey SageSales $450,000 $100,000Gain on sale of land 10,000Cost of sales (220,000) (50,000)Depreciation expense (95,000) (32,000)Other expenses (37,000) (8,000)Net income $98,000 $20,000Required:At what amounts did the following items appear on the consolidated income statement for Prey and Subsidiary for the year ended December 31, 2012?1. Gain on Sale of Land2. Depreciation Expense3. Consolidated net income4. Controlling interest share of consolidated net income

Q: Separate income statements of Pingair Corporation and its 90%-owned subsidiary, Staunch Inc., for 2011 were as follows:Pingair StaunchSales Revenue $2,200,000 $1,000,000Cost of sales (1,400,000) (600,000)Other expenses (400,000) (200,000)Gain on equipment 80,000Income from Staunch 128,000Net income $608,000 $200,000Additional information:1. Pingair acquired its 90% interest in Staunch Inc. when the book values were equal to the fair values.2. The gain on equipment relates to equipment with a book value of $120,000 and a 4-year remaining useful life that Pingair sold to Staunch for $200,000 on January 2, 2011. The straight-line depreciation method is used. The equipment has no salvage value.3. Pingair sold inventory to Staunch in 2010 and 2011 as shown in the table below. (The 2010 ending inventory is sold in 2011.) 2010 2011Intercompany sales $300,000 200,000Original cost from third-party 180,000 120,000Percentage unsold at year-end 40 504. Staunch did not declare or pay dividends in 2010 and 2011.Required:1. Prepare adjusting/eliminating entries for the consolidation worksheet at December 31, 2011.2. Prepare a consolidated income statement for Pingair Corporation and Subsidiary for the year ended December 31, 2011.

Q: Snow Company is a wholly owned subsidiary of Penguin Corporation. On January 1, 2009, Penguin transferred equipment to Snow for $195,000. The equipment had originally cost $250,000, but at the time of transfer, had a $180,000 book value and a five year remaining life. Both companies use the straight-line method of depreciation and assume no salvage value for the equipment. Required: Prepare the consolidation worksheet entries for this asset on the following dates:1. December 31, 20092. December 31, 20103. December 31, 2011

Q: On January 1, 2012 Saffron Co. recorded a $40,000 profit on the upstream sale of some equipment that had a remaining four-year life under the straight-line depreciation method. The equipment has no salvage value. Saffron had separate income of $100,000 in 2012. The parent company, Pommel Incorporated, owns 90% of Saffron. Pommel would report investment income from Saffron in 2012 ofA) $54,000.B) $63,000.C) $90,000.D) $126,000.

Q: Pogo Corporation acquired a 75% interest in Sperry Corporation on January 1, 2009 at a cost equal to book value and fair value. In the same year Sperry sold land costing $25,000 to Pogo for $50,000. On July 1, 2012, Pogo sold the land to an unrelated party for $85,000. What was the gain on the sale of the land on the consolidated income statement for 2012?A) $25,000B) $35,000C) $45,000D) $60,000

Q: Petrol Company acquired an 90% interest in Seadig Corporation on January 1, 2010. On January 1, 2011, Seadig sold a building with a book value of $120,000 to Petrol for $150,000. The building had a remaining useful life of ten years and no salvage value. Straight-line depreciation is used. The separate balance sheets of Petrol and Seadig on December 31, 2011 included the following balances:Petrol SeadigBuildings $500,000 $230,000Accumulated Depr. - Buildings 180,000 79,000The consolidated amounts for Buildings and Accumulated Depreciation - Buildings that appeared, respectively, on the balance sheet at December 31, 2011, wereA) $700,000 and $256,000.B) $700,000 and $259,000.C) $730,000 and $256,000.D) $730,000 and $259,000.

Q: Plenny Corporation sold equipment to its 90%-owned subsidiary, Sourdough Corp., on January 1, 2012. Plenny sold the equipment for $100,000 when its book value was $75,000 and it had a 5-year remaining useful life with no expected salvage value. Straight-line depreciation is used by both companies. Separate balance sheets for Plenny and Sourdough included the following equipment and accumulated depreciation amounts on December 31, 2012:Plenny SourdoughEquipment $850,000 $300,000Less: Accumulated depreciation (200,000) (60,000)Equipment-net $650,000 $240,000Consolidated amounts for equipment and accumulated depreciation at December 31, 2012 were respectivelyA) $1,125,000 and $255,000.B) $1,125,000 and $260,000.C) $1,150,000 and $255,000.D) $1,150,000 and $260,000.

Q: Assume an upstream sale of machinery occurs on January 1, 2011. The parent owns 70% of the subsidiary. There is a gain on the intercompany transfer and the machine has five remaining years of useful life and no salvage value. Straight-line depreciation is used. Which of the following statements is correct?A) Noncontrolling interest share for 2011 is equal to: subsidiary income for 2011 multiplied by 30%.B) Noncontrolling interest share for 2011 is equal to: (subsidiary income for 2011 minus the gain on sale plus the excess depreciation expense) multiplied by 30%.C) Noncontrolling interest share for 2011 is equal to: (subsidiary income for 2011 minus the gain on sale) multiplied by 30%.D) Noncontrolling interest share for 2011 is equal to: (subsidiary income for 2011 plus the excess depreciation expense) multiplied by 30%.

Q: Parrot Company owns all the outstanding voting stock of Southern Manufacturing. On January 1, 2012, Parrot sold machinery to Southern at its book value of $24,000. Parrot had the machinery three years before selling it and used an eight-year straight-line depreciation method, with zero salvage value. Southern will use the straight-line depreciation method, and assumes the machine has five years remaining and no salvage value. In the 2012 consolidating working papers, the depreciation expenseA) required no adjustment.B) decreased by $4,800.C) increased by $4,800D) increased by $8,000.

Q: Upstream sale: Plock's separate net income $400,000 Seraphim's separate net income 80,000 Less: Unrealized gain on vehicle (4,000) Plus: Excess depreciation Consolidated Net income Noncontrolling interest share ($80,000 - 4,000 + 1,000) 25% Controlling share of consolidated net income

Q: Plateau Incorporated bought 60% of the common stock of Sachet Company several years ago. At the time of purchase, the fair value and book value of Sachet's net assets were equal. The cost of the 60% investment was equal to 60% of the book value of Sachet's net assets. Plateau sells merchandise to Sachet at 125% above Plateau's cost. Intercompany sales from Plateau to Sachet for 2012 were $60,000. Unrealized profits in Sachet's December 31, 2011 inventory and December 31, 2012 inventory were $6,000 and $4,500, respectively. Sachet reported net income of $120,000 for 2012. Required: In General Journal format, prepare consolidation working paper entries at December 31, 2012 to eliminate the effects of the intercompany inventory sales.

Q: Presented below are several figures reported for Plate Corporation and Saucer Industries as of December 31, 2011. Plate has owned 70% of Saucer for the past five years, and at the time of purchase, the book value of Saucer's assets and liabilities equaled the fair value. The cost of the 70% investment was equal to 70% of the book value of Saucer's net assets. At the time of purchase, the fair values and book values of Saucer's assets and liabilities were equal. Plate Saucer Inventory $120,000 $60,000 Sales 200,000 140,000 Cost of Goods Sold 130,000 80,000 Expenses 40,000 30,000 In 2010, Saucer sold inventory to Plate which had cost $40,000 for $60,000. 25% of this inventory remained on hand at December 31, 2010, but was sold in 2011. In 2011, Saucer sold inventory to Plate which had cost $30,000 for $45,000. 40% of this inventory remained unsold at December 31, 2011. Required: Calculate following balances at December 31, 2011. a. Consolidated Sales b. Consolidated Cost of goods sold c. Consolidated Expenses d. Noncontrolling interest share of Saucer's net income e. Consolidated Inventory

Q: Pastern Industries has an 80% ownership stake in Sascon Incorporated. At the time of purchase, the book value of Sascon's assets and liabilities were equal to the fair value. The cost of the 80% investment was equal to 80% of the book value of Sascon's net assets. At the end of 2011, they issued the following consolidated income statement: Sales $930,000 Cost of sales (470,000) Operating expenses (202,000) Noncontrolling interest share (23,000) Controlling interest share $235,000 Shortly after the statements were issued, Pastern discovered that the 2011 intercompany sales transactions had not been properly eliminated in consolidation. In fact, Pastern had sold inventory that cost $80,000 to Sascon for $90,000, and Sascon had sold inventory that cost $50,000 to Pastern for $65,000. Half of the products from both transactions still remained in inventory at December 31, 2011. Required: Prepare a corrected income statement for Pastern and Subsidiary for 2011.

Q: Proman Manufacturing owns a 90% interest in Sipp Company, purchased at a time when the book values of Sipp's recorded assets and liabilities were equal to fair values. During 2011, Sipp sold merchandise to Proman for $80,000 at a 20% gross profit. At December 31, 2011, 25% of this merchandise is still in Proman's inventory. Separate incomes for Proman and Sipp are summarized as follows: Proman Sipp Sales $900,000 $200,000 Cost of sales 400,000 100,000 Gross profit 500,000 100,000 Operating expenses 200,000 80,000 Separate income $300,000 $ 20,000 Required: Prepare a consolidated income statement for 2011 for Proman and subsidiary.

Q: On January 1, 2011, Palling Corporation purchased 70% of the common stock of Sam's Storage Systems for $320,000 when Sam's had Common Stock outstanding of $100,000 and Retained Earnings of $200,000. Any excess differential was attributed to goodwill. At the end of 2011, Palling and Sam's had unrealized inventory profits from intercompany sales of $6,000 and $8,000, respectively. These year-end profit amounts were realized in 2012. At the end of 2012, Palling held inventory acquired from Sam's with a $10,000 unrealized profit. Palling reported separate income of $100,000 for 2012 and paid dividends of $30,000. Sam's reported separate income of $70,000 for 2012 and paid dividends of $20,000. Required: Compute the controlling interest share of consolidated net income for 2012.

Q: Plover Corporation acquired 80% of Sink Inc. equity on January 1, 2010, when the book values of Sink's assets and liabilities were equal to their fair values. The cost of the investment was equal to 80% of the book value of Sink's net assets. Plover separate income (excluding Sink) was $1,800,000, $1,700,000 and $1,900,000 in 2010, 2011 and 2012 respectively. Plover sold inventory to Sink during 2010 at a gross profit of $48,000 and one quarter remained at Sink at the end of the year. The remaining 25 percent was sold in 2011. At the end of 2011, Plover has $25,000 of inventory received from Sink from a sale of $100,000 which cost Sink $80,000. There are no unrealized profits in the inventory of Plover or Sink at the end of 2012. Plover uses the equity method in its separate books. Select financial information for Sink follows: 2010 2011 2012 Sales $790,000 $840,000 $940,000 Cost of Sales (420,000) (440,000) (500,000) Gross Profit 370,000 400,000 440,000 Operating Expenses (300,000) (320,000) (350,000) Net Income $ 70,000 $ 80,000 $ 90,000 Required: Prepare a schedule to determine the controlling interest share of the consolidated net income for 2010, 2011, and 2012.

Q: Papal Corporation acquired an 80% interest in Sandman Corporation at a cost equal to 80% of the book value of Sandman's net assets in 2010. At the time of the acquisition, the book values and fair values of Sandman's assets and liabilities were equal. During 2011, Papal recorded sales of $440,000 of merchandise to Sandman at a gross profit rate of 30%. Sandman's beginning and ending inventories for 2011 were $60,000 and $80,000, respectively. Income statement information for both companies for 2011 is as follows: Papal Sandman Sales Revenue $1,660,000 $580,000 Invest.income from Sandman 59,600 Cost of Goods Sold (1,060,000) (394,000) Expenses (358,000) (104,000) Net Income $301,600 $82,000 Required: Prepare a consolidated income statement for Papal Corporation and Subsidiary for 2011.

Q: Pittle Corporation acquired a 80% interest in Seel Corporation at a cost equal to 80% of the book value of Seel's net assets several years ago. At the time of purchase, the fair value and book value of Seel's assets and liabilities were equal. Pittle purchases its entire inventory from Seel at 150% of Seel's cost. During 2011, Seel sold $490,000 of merchandise to Pittle. Pittle's beginning and ending inventories for 2011 were $72,000 and $66,000, respectively. Income statement information for both companies for 2011 is as follows: Pittle Seel Sales Revenue $ 820,000 $440,000 Investment income from Sitt 145,600 Cost of Goods Sold (460,000) (165,000) Expenses (120,000) (95,000) Net Income $ 385,600 $ 180,000 Required: Prepare a consolidated income statement for Pittle Corporation and Subsidiary for 2011.

Q: Peel Corporation acquired a 80% interest in Sitt Corporation at a cost equal to 80% of the book value of Sitt several years ago. At the time of purchase, the fair value and book value of Sitt's assets and liabilities were equal. Sitt purchases its entire inventory from Peel at 150% of Peel's cost. During 2011, Peel sold $190,000 of merchandise to Sitt. Sitt's beginning and ending inventories for 2011 were $72,000 and $66,000, respectively. Income statement information for both companies for 2011 is as follows: Peel Sitt Sales Revenue $820,000 $440,000 Investment income from Sitt 146,000 Cost of Goods Sold (460,000) (165,000) Expenses (120,000) (95,000) Net Income $386,000 $180,000 Required: Prepare a consolidated income statement for Peel Corporation and Subsidiary for 2011.

Q: PreBuild Manufacturing acquired 100% of Shoding Industries common stock on January 1, 2010, for $670,000 when the book values of Shoding's assets and liabilities were equal to their fair values and Shoding's stockholders' equity consisted of $380,000 of Capital Stock and $290,000 of Retained Earnings. PreBuild's separate income (excluding investment income from Shoding) was $870,000, $830,000 and $960,000 in 2010, 2011 and 2012, respectively. PreBuild sold inventory to Shoding during 2010 at a gross profit of $50,000 and 50% remained at Shoding at the end of the year. The remaining 50% was sold in 2011. At the end of 2011, PreBuild has $54,000 of inventory received from Shoding from a sale of $180,000 which cost Shoding $150,000. There are no unrealized profits in the inventory of PreBuild or Shoding at the end of 2012. PreBuild uses the equity method in its separate books. Select financial information for Shoding follows: 2010 2011 2012 Sales $890,000 $995,000 $1,020,000 Cost of Sales (420,000) (475,000) (505,000) Gross Profit 470,000 520,000 515,000 Operating Expenses (350,000) (380,000) (390,000) Net Income $120,000 $140,000 $125,000 Required: Prepare a schedule to determine PreBuild Manufacturing's Consolidated net income for 2010, 2011, and 2012.

Q: Pexo Industries purchases the majority of their raw materials from a wholly-owned subsidiary, Springmade Chemicals. Pexo purchased Springmade to assure supply availability at a time when the materials were being rationed in the industry due to supply issues overseas. Pexo was able to purchase Springmade at the book value of Springmade's net assets. At the time of purchase, the book value and fair value of Springmade's net assets were equal. Pexo purchased $2,890,000 of materials from Springmade in 2011 alone. All intercompany sales are made at 120% of cost, although Springmade is able to mark up their products 80% to other outside buyers. Pexo carried inventory on their books at the beginning and end of the year in the amount of $450,000 and $480,000, respectively, all of which had been purchased from Springmade. Income statement information for both companies for 2011 is as follows: Pexo Springmade Sales Revenue $3,793,000 $4,441,000 Investment income from Springmade 245,000 Cost of Goods Sold (3,139,000) (3,270,000) Expenses (257,000) (921,000) Net Income $642,000 $250,000 Required: Prepare a consolidated income statement for Pexo Corporation and Subsidiary for 2011.

Q: Preen Corporation acquired a 60% interest in Shino Corporation at a cost equal to 60% of the book value of Shino's net assets in 2010. At the time of acquisition, the book value and fair value of Shino's assets and liabilities were equal. During 2011, Preen sold $120,000 of merchandise to Shino. All intercompany sales are made at 150% of Preen's cost. Shino's beginning and ending inventories resulting from intercompany sales for 2011 were $60,000 and $36,000, respectively. Income statement information for both companies for 2011 is as follows: Preen Shino Sales Revenue $730,000 $262,000 Investment income from Shino 38,000 Cost of Goods Sold (319,000) (172,000) Expenses (165,000) (40,000) Net Income $284,000 $50,000 Required: Prepare a consolidated income statement for Preen Corporation and Subsidiary for 2011.

Q: Perry Instruments International purchased 75% of the outstanding common stock of Standard Systems in 1997 when the book values and fair values of Standard's assets and liabilities were equal. The cost of Perry's investment was equal to 75% of the book value of Standard's net assets. Separate company income statements for Perry and Standard for the year ended December 31, 2011 are summarized as follows: Perry Standard Sales Revenue $2,400,000 $800,000 Investment income from Standard 142,000 Cost of Goods Sold (1,600,000) (400,000) Expenses (450,000) (200,000) Net Income $492,000 $200,000 During 2011, the companies began to manage their inventory differently, and worked together to keep their inventories low at each location. In doing so, they agreed to sell inventory to each other as needed at a markup of 10% of cost. Perry sold merchandise that cost $100,000 to Standard for $110,000, and Standard sold inventory that cost $80,000 to Perry for $88,000. Half of this merchandise remained in each company's inventory at December 31, 2011. Required: Prepare a consolidated income statement for Perry Corporation and Subsidiary for 2011.

Q: Pfeifer Corporation acquired an 80% interest in Stern Corporation several years ago when the book values and fair values of Stern's assets and liabilities were equal. At the time of acquisition, the cost of the 80% interest was equal to 80% of the book value of Stern's net assets. Separate company income statements for Pfeifer and Stern for the year ended December 31, 2011 are summarized as follows: Pfeifer Stern Sales Revenue $1,000,000 $600,000 Investment income from Stern 85,000 Cost of Goods Sold (600,000) (300,000) Expenses (200,000) (200,000) Net Income $285,000 $100,000 During 2010, Pfeifer sold merchandise that cost $120,000 to Stern for $180,000. Half of this merchandise remained in Stern's inventory at December 31, 2010. During 2011, Pfeifer sold merchandise that cost $150,000 to Stern for $225,000. One-third of this merchandise remained in Stern's December 31, 2011 inventory. Required: Prepare a consolidated income statement for Pfeifer Corporation and Subsidiary for 2011.

Q: Psalm Enterprises owns 90% of the outstanding voting stock of Solomon Siding, which was purchased at a cost equal to 90% of the book value of Solomon's net assets many years ago. (At the time of purchase, the fair value and book value of Solomon's net assets were equal.) Psalm purchases merchandise from Solomon at 110% above Solomon's cost. In 2012, intercompany sales from Solomon to Psalm amounted to $362,000. Unrealized profits in Psalm's December 31, 2011 inventory and December 31, 2012 inventory were $82,000 and $26,000, respectively. Solomon reported net income of $980,000 for 2012. Required: 1. Determine Psalm's income from Solomon for 2012. 2. In General Journal format, prepare consolidation working paper entries at December 31, 2012 to eliminate the effects of the intercompany inventory sales assuming the perpetual inventory method is used.

Q: Pirate Transport bought 80% of the outstanding voting stock of Seaways Shipping at book value several years ago. (At the time of purchase, the fair value and book value of Seaways' net assets were equal.) Pirate sells merchandise to Seaways at 120% above Pirate's cost. Intercompany sales from Pirate to Seaways for 2012 were $450,000. Unrealized profits in Seaways' December 31, 2011 inventory and December 31, 2012 inventory were $17,000 and $15,000, respectively. Seaways reported net income of $750,000 for 2012. Required: 1. Determine Pirate's income from Seaways for 2012. 2. In General Journal format, prepare consolidation working paper entries at December 31, 2012 to eliminate the effects of the intercompany inventory sales assuming the perpetual inventory method is used.

Q: Salli Corporation regularly purchases merchandise from their 90%-owner, Playtime Corporation. Playtime purchased the 90% interest at a cost equal to 90% of the book value of Salli's net assets. At the time of acquisition, the book values and fair values of Salli's assets and liabilities were equal. Playtime makes their sales to Salli at 120% of cost. In 2012, Salli reported net income of $460,000, and made purchases totaling $172,000 from Playtime. Although Salli had no inventory on hand at the beginning of 2012 that they had purchased from Playtime, at year end, they had $51,600 of this merchandise in inventory. Required: 1. Determine the unrealized profit in Salli's inventory at December 31, 2012. 2. Compute Playtime's income from Salli for 2012.

Q: Penguin Corporation acquired a 60% interest in Squid Corporation on January 1, 2012, at a cost equal to 60% of the book value of Squid's net assets. At the time of the acquisition, the book values of Squid's assets and liabilities were equal to the fair values. Squid reports net income of $880,000 for 2012. Penguin regularly sells merchandise to Squid at 120% of Penguin's cost. The intercompany sales information for 2012 is as follows: Intercompany sales at selling price $672,000 Sales value of merchandise unsold by Squid $132,000 Required: 1. Determine the unrealized profit in Squid's inventory at December 31, 2012. 2. Compute Penquin's income from Squid for 2012.

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