Accounting Chapter 5 6 The Gain Intra entity Transfer Depreciable Asset

104. How is the gain on an intra-entity transfer of a depreciable asset realized?

105. Dithers Inc. acquired all of the common stock of Bumstead Corp. on

January 1, 2011. During 2011, Bumstead sold land to Dithers at a gain.

No

consolidation entry for the sale of the land

was made at the end of 2011. What

errors will this omission cause in the consolidated financial statements?

106. Why do intra-entity transfers between the component companies of a

business combination occur so frequently?

107. Fraker, Inc. owns 90 percent of Richards, Inc. and bought $200,000 of

Richards’ inventory in 2011. The transfer price was equal to 30 percent of the

sales price. When preparing consolidated financial statements, what amount of

these sales is eliminated?

108. What is meant by

unrealized inventory gains

, and how are they treated on a

consolidation worksheet?

109. What is the impact on the non-controlling interest of a subsidiary when

there are downstream transfers of inventory between the parent and subsidiary

companies?

110. When is the gain on an intra-entity transfer of land realized?

111. What is the purpose of the

adjustments to depreciation expense

within the

consolidation process when there has been an intra-entity transfer of a

depreciable asset?

112. Tara Company owns 80 percent of the common stock of Stodd Inc. In the

current year, Tara reports sales of $5,000,000 and cost of goods sold of

$3,500,000. For the same period, Stodd has sales of $500,000 and cost of goods

sold of $400,000. During the year, Stodd sold merchandise to Tara for $40,000 at

a price based on the normal markup. At the end of the year, Tara still possesses

20 percent of this inventory. Prepare the consolidation entry to defer the

unrealized gain.

113. King Corp. owns 85% of James Co. King uses the equity method to account

for this investment. During 2011, King sells inventory to James for $500,000. The

inventory originally cost King $420,000. At 12/31/11, 25% of the goods were still

in James’ inventory.

Required:

Prepare the

Consolidation Entry TI

and

Consolidation Entry G

for the

consolidation worksheet.

114. Flintstone Inc. acquired all of Rubble Co. on January 1, 2011. Flintstone

decided to use the

initial value method

to account for this investment. During

2011, Flintstone sold to Rubble for $600,000 inventory with a cost of $500,000. At

the end of the year 30% of the goods were still in Rubble’s inventory.

Required:

Prepare

Consolidation Entry TI

for the intra-entity transfer and

Consolidation

Entry G

for the ending inventory adjustment necessary for the consolidation

worksheet at 12/31/11.

115. Yoderly Co., a wholly owned subsidiary of Nelson Corp., sold goods to

Nelson near the end of 2011. The goods had cost Yoderly $105,000 and the

selling price was $140,000. Nelson had not sold any of the goods by the end of

the year.

Required:

Prepare

Consolidation Entry TI

and

Consolidation Entry G

that are required for

2011.

116. Strayten Corp. is a wholly owned subsidiary of Quint Inc. Quint decided to

use the

initial value method

to account for this investment. During 2011, Strayten

sold Quint goods which had cost $48,000. The selling price was $64,000. Quint

still had one-eighth of the goods purchased from Strayten on hand at the end of

2011.

Required:

Prepare

Consolidation Entry *G

, which would have to be recorded at the end of

2011.

117. Hambly Corp. owned 80% of the voting common stock of Stroban Co.

During 2011, Stroban sold a parcel of land to Hambly. The land had a book value

of $82,000 and was sold to Hambly for $145,000. Stroban’s reported net income

for 2011 was $119,000.

Required:

What was the

non-controlling interest’s share of Stroban Co.’s net income

?