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Exam 5: A: Consolidated Financial Statements Intra-Entity Asset Transactions

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Question 51

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Dithers Inc.acquired all of the common stock of Bumstead Corp.on January 1, 2018.During 2018, Bumstead sold land to Dithers at a gain.No consolidation entry for the sale of the land was made at the end of 2018.What errors will this omission cause in the consolidated financial statements?

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Consolidation Entry for 2018
Gain on Sal...

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Question 52

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On April 7, 2018, Pate Corp.sold land to Shannahan Co., its subsidiary.From a consolidated financial statement point of view, when will the gain on this transfer actually be recognized?

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The gain is recogniz...

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Question 53

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Assume the same information, except Shannon sold inventory to Patti.Compute consolidated sales.

Varton Corp.acquired all of the voting common stock of Caleb Co.on January 1, 2018.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 transfer be accounted for by the consolidated entity?

In the consolidation worksheet for 2017, which of the following accounts would be debited to eliminate unrecognized intra-entity gross profit with regard to the 2017 intra-entity transfers?

Webb Co.acquired 100% of Rand Inc.on January 5, 2018.During 2018, Webb sold goods to Rand for $2,400,000 that cost Webb $1,800,000.Rand still owned 40% of the goods at the end of the year.Cost of goods sold was $10,800,000 for Webb and $6,400,000 for Rand.What was consolidated cost of goods sold?

Prepare a schedule of consolidated net income and the share to controlling and noncontrolling interests for 2018, assuming that Musial owned only 90% of Matin and the equipment transfer had been downstream.

Which of the following statements is true concerning an intra-entity transfer of a depreciable asset?

Assume that Polar sold inventory to Icecap at a markup equal to 25% of cost.Intra-entity transfers were $130,000 in 2017 and $165,000 in 2018.Of this inventory, $39,000 of the 2017 transfers were retained and then sold by Icecap in 2018, while $55,000 of the 2018 transfers was held until 2019. Required: For the consolidated financial statements for 2018, determine the balances that would appear for the following accounts: (i) Cost of Goods Sold; (ii) Inventory; and (iii) Net income attributable to the noncontrolling interest.

How is the gain on an intra-entity transfer of a depreciable asset recognized?

Gibson Corp.owned a 90% interest in Sparis Co.Sparis frequently made sales of inventory to Gibson.The sales, which include a markup over cost of 25%, were $420,000 in 2017 and $500,000 in 2018.At the end of each year, Gibson still owned 30% of the goods.Net income for Sparis was $912,000 during 2018.Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what was the net income attributable to the noncontrolling interest for 2018?

Dalton Corp.owned 70% of the outstanding common stock of Shrugs Inc.On January 1, 2016, Dalton acquired a building with a ten-year life for $420,000.No salvage value was anticipated and the building was to be depreciated on the straight-line basis.On January 1, 2018, Dalton sold this building to Shrugs for $392,000.At that time, the building had a remaining life of eight years but still no expected salvage value.For consolidation purposes, what is the Excess Depreciation (ED entry) for this building for 2018?

Parent sold land to its subsidiary resulting in a gain in 2016, the year of transfer.The subsidiary sold the land to an unrelated third party for a gain in 2019.Which of the following statements is true?

Chain Co.owned all of the voting common stock of Shannon Corp.The corporations' balance sheets dated December 31, 2017, include the following balances for land: for Chain--$416,000, and for Shannon--$256,000.On the original date of acquisition, the book value of Shannon's land was equal to its fair value.On April 4, 2018, Chain sold to Shannon a parcel of land with a book value of $65,000.The selling price was $83,000.There were no other transfers, which affected the companies' land accounts during 2017.What is the consolidated balance for land on the 2018 balance sheet?

For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2019 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2018 intra-entity transfer of merchandise?

Which of the following statements is true regarding an intra-entity transfer of land?

Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stark reported on Parker's books for 2017.

During 2018, Edwards Co.sold inventory to its parent company, Forsyth Corp.Forsyth still owned the entire amount of inventory purchased at the end of 2018.Why must the gross profit on the sale be deferred when consolidated financial statements are prepared at the end of 2018?

An intra-entity transfer took place whereby the transfer price was less than the book value of a depreciable asset.Which statement is true for the year subsequent to the year of transfer?

What is the net effect on net income as a result of consolidating adjustments made in 2017 with respect to the equipment transfer?