84. Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker
on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported
net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012,
respectively. Parker sold the land purchased from Stark in 2010 for $92,000 in
2012.
Which of the following will be included in a consolidation entry for 2011?
85. Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker
on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported
net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012,
respectively. Parker sold the land purchased from Stark in 2010 for $92,000 in
2012.
Compute income from Stark reported on Parker’s books for 2010.
86. Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker
on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported
net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012,
respectively. Parker sold the land purchased from Stark in 2010 for $92,000 in
2012.
Compute income from Stark reported on Parker’s books for 2011.
87. Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker
on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported
net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012,
respectively. Parker sold the land purchased from Stark in 2010 for $92,000 in
2012.
Compute Parker’s reported gain or loss relating to the land for 2012.
88. Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker
on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported
net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012,
respectively. Parker sold the land purchased from Stark in 2010 for $92,000 in
2012.
Compute Stark’s reported gain or loss relating to the land for 2012.
89. Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker
on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported
net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012,
respectively. Parker sold the land purchased from Stark in 2010 for $92,000 in
2012.
Compute the gain or loss relating to the land that will be reported in consolidated
net income for 2012.
90. Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker
on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported
net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012,
respectively. Parker sold the land purchased from Stark in 2010 for $92,000 in
2012.
Compute income from Stark reported on Parker’s books for 2012.
91. Pepe, Incorporated acquired 60% of Devin Company on January 1, 2010. On
that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of
$120,000 and accumulated depreciation of $66,000 with a remaining life of 9
years. Devin reported net income of $300,000 and $325,000 for 2010 and 2011,
respectively. Pepe uses the equity method to account for its investment in Devin.
What is the gain or loss on equipment reported by Devin for 2010?
92. Pepe, Incorporated acquired 60% of Devin Company on January 1, 2010. On
that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of
$120,000 and accumulated depreciation of $66,000 with a remaining life of 9
years. Devin reported net income of $300,000 and $325,000 for 2010 and 2011,
respectively. Pepe uses the equity method to account for its investment in Devin.
What is the consolidated gain or loss on equipment for 2010?
93. Pepe, Incorporated acquired 60% of Devin Company on January 1, 2010. On
that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of
$120,000 and accumulated depreciation of $66,000 with a remaining life of 9
years. Devin reported net income of $300,000 and $325,000 for 2010 and 2011,
respectively. Pepe uses the equity method to account for its investment in Devin.
Compute the income from Devin reported on Pepe’s books for 2010.
94. Pepe, Incorporated acquired 60% of Devin Company on January 1, 2010. On
that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of
$120,000 and accumulated depreciation of $66,000 with a remaining life of 9
years. Devin reported net income of $300,000 and $325,000 for 2010 and 2011,
respectively. Pepe uses the equity method to account for its investment in Devin.
Compute the income from Devin reported on Pepe’s books for 2011.
95. Pepe, Incorporated acquired 60% of Devin Company on January 1, 2010. On
that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of
$120,000 and accumulated depreciation of $66,000 with a remaining life of 9
years. Devin reported net income of $300,000 and $325,000 for 2010 and 2011,
respectively. Pepe uses the equity method to account for its investment in Devin.
Compute the non-controlling interest in the net income of Devin for 2010.
96. Pepe, Incorporated acquired 60% of Devin Company on January 1, 2010. On
that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of
$120,000 and accumulated depreciation of $66,000 with a remaining life of 9
years. Devin reported net income of $300,000 and $325,000 for 2010 and 2011,
respectively. Pepe uses the equity method to account for its investment in Devin.
Compute the non-controlling interest in the net income of Devin for 2011.
97. For each of the following situations (1 – 10), select the correct entry (A – E)
that would be required
on a consolidation worksheet.
(A.) Debit retained earnings.
(B.) Credit retained earnings.
(C.) Debit investment in subsidiary.
(D.) Credit investment in subsidiary.
(E.) None of the above.
___ 1. Upstream beginning inventory profit, using the initial value method.
___ 2. Downstream beginning inventory profit, using the initial value method.
___ 3. Upstream ending inventory profit, using the initial value method.
___ 4. Downstream ending inventory profit, using the initial value method.
___ 5. Upstream transfer of depreciable assets, in the period after transfer, where
subsidiary recognizes a gain, using the initial value method.
___ 6. Downstream transfer of depreciable assets, in the period after transfer,
where parent recognizes a gain, using the initial value method.
___ 7. Upstream transfer of land, in the period after transfer, where subsidiary
recognizes a loss, using the initial value method.
___ 8. Downstream transfer of land, in the period after transfer, where parent
recognizes a loss, using the initial value method.
___ 9. Eliminate income from subsidiary, recorded under the equity method.
___ 10. Eliminate recorded amortization of acquisition fair value over book value,
recorded under the equity method.
98. On April 7, 2011, Pate Corp. sold land to Shannahan Co., its subsidiary.
From a consolidated point of view, when will the gain on this transfer actually be
earned?
99. Throughout 2011, Cleveland Co. sold inventory to Leeward Co., its
subsidiary. From a consolidated point of view, when will the gain on this transfer
be earned?
100. Varton Corp. acquired all of the voting common stock of Caleb Co. on
January 1, 2011. Varton owned some land with a book value of $84,000 that was
sold to Caleb for its fair value of $120,000. How should this transaction be
accounted for by the consolidated entity?
101. During 2011, Edwards Co. sold inventory to its parent company, Forsyth
Corp. Forsyth still owned the entire inventory purchased at the end of 2011. Why
must the gross profit on the sale be deferred when consolidated financial
statements are prepared at the end of 2011?
102. How does a gain on an intra-entity sale of equipment affect the calculation
of a non-controlling interest?
103. How do upstream
and
downstream inventory transfers differ in their effect
in a year-end consolidation?