Accounting Problem 5-1, 5-2, 5-3 and 5-4

Accounting Problem 5-1, 5-2, 5-3 and 5-4 in $14 (Instant Download)

Problem 5-1
Par Corporation acquired its 90 percent interest in Sam Corporation at its book value of $3,600,000 on January 1, 2011, when Sam had capital stock of $3,000,000 and retained earnings of $1,000,000. The December 31, 2011 and 2012, inventories of Par included merchandise acquired from Sam of $300,000 and $400,000, respectively. Sam realizes a gross profit of 40 percent on all merchandise sold. During 2011 and 2012, sales by Sam to Par were $600,000 and $800,000, respectively. Summary adjusted trial balances for Par and Sam at December 31, 2012, follow (in thousands):

Par Sam
Cash 1000 200
Receivables-net 2000 500
Inventories 2400 1000
Plan Assets-net 2500 4800
Investments in Sam-90% 4356 —-
Cost of sales 8000 3900
Other expenses 3400 1600
Dividends 1000 500
24,656 12,500

Required: Prepare a combined consolidated income sand retained earnings statement for Par Corporation and Subsidiary for the year ended December 31,2012.

Problem 5-2
2. Put Corporation acquired a 90 percent interest in Sam Corporation at book value on January 1, 2011.
Intercompany purchases and sales and inventory data for 2011, 2012, and 2013, are as follows:
Sales by sam to put intercompany profit in put’s inventory at December 31
2011 400,000 30,000
2012 300,000 24,000
2013 600,000 48,000

Selected data from the financial statements of Put and Sam at and for the year ended December 31, 2013,
are as follows:
Put Sam
Income Statement
Sales 1,800,000 1,200,000
Cost of sales 1,250,000 600,000
Expenses 450,000 300,000
Income from Sam 248,400 ———
Balance Sheet
Inventory 300,000 160,000
Retained earnings December
31, 2013 850,000 440,000
Capital Stock 1,000,000 600,000

REQUIRED: Prepare well-organized schedules showing computations for each of the following:
1. Consolidated cost of sales for 2013
2. Noncontrolling interest share for 2013
3. Consolidated net income for 2013
4. Noncontrolling interest at December 31,2013

Problem 5-3
Pot company owns controlling interest in San and Tay corporations, having acquired 80 percent interest in San in 2011, and a 90 percent interest in Tay on January 1, 2012. Pot’s investments in San and Tay were at book value equal to fair value. Inventories of the affiliated companies at December 31,2013 and December 31 2012
were as follows:

December 31, 2012 December 31, 2013
Pot Inventories 120,000 108,000
San Inventories 77,500 62,500
Tay Inventories 48,000 72,000

Pot sells to san at a 25% markup based on cost, and Tay sells to Pot at a 20% markup based on cost. Pot’s Beginning and ending inventories for 2013 consisted of 40% and 50%, respectively, of good acquired from Tay. All of Tan’s inventories consisted of merchandise acquired from Pot.

Required:
Calculate the inventory that should appear in the December 31, 2012, consolidated balance sheet.
Calculate the inventory that should appear in the December 31, 2013, consolidated balance sheet.

Problem 5-4
Comparative income statements of Stu Corporation for the calendar years 2011, 2012, and 2013 are as follows (in thousands):
2011 2012 2013
Sales 24,000 25,500 28,500
Cost of Sales 12,600 13,200 15,000
Gross Profit 11,400 12,300 13,500
Operating expenses 9000 9,600 11,400
Net Income 2,400 2,700 2,100

Stu was a 75 percent-owned subsidiary of Pli Corporation throughout the 2011–2013 period. Pli’s separate income (excludes income from Stu) was $10,800,000, $10,200,000, and $12,000,000 in 2011, 2012, and 2013, respectively. Pli acquired its interest in Stu at its underlying book value, which was equal to fair value on July 1, 2010.

2. Pit sold inventory items to Stu during 2011 at a gross profit to Pit of 1,200,000, half the merchandise remained in Stu’s inventory at December 31, 2011. Total sales by Pit to Stu in 2011 were 3,000,000. The remaining merchandise was sold by Stu in 2012.
3. Pit’s inventory at December 31, 2012 included items acquired from Stu on which Stu made a profit of 600,000. Total sales by Stu to Pit during 2012 were $2,400,000.
4. There were no unrealized profits in the December 31, 2013, inventories of either Stu or pit.
5. Pit uses the equity method of accounting got its investment in Stu.

Required:
1. Prepare a schedule showing Pit’s income from Stu for the years 2011, 2012, and 2013.
2. Compute Pit’s net income for the years 2011,2012 and 2013.
3. Prepare a schedule of consolidated net income from Pit Corporation and Subsidiary for the years 2011, 2012, and 2013, beginning with the separate incomes for the two affiliates and including non controlling interest

Sample Answer fro Problem 5-1:

Asnwer

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