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On January 1, 2014, Doone Corporation acquired 80 percent of theoutstanding voting stock of Rockne Company for $784,000consideration. At the acquisition date, the fair value of the 20percent noncontrolling interest was $196,000 and Rockne’s assetsand liabilities had a collective net fair value of $980,000. Dooneuses the equity method in its internal records to account for itsinvestment in Rockne. Rockne reports net income of $380,000 in2015. Since being acquired, Rockne has regularly supplied inventoryto Doone at 25 percent more than cost. Sales to Doone amounted to$440,000 in 2014 and $540,000 in 2015. Approximately 30 percent ofthe inventory purchased during any one year is not used until thefollowing year.

a. What is the noncontrolling interest’s shareof Rockne’s 2015 income?

b. Prepare Doone’s 2015 consolidation entriesrequired by the intra-entity inventory transfers.

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Nelly Stracke
Nelly StrackeLv2
28 Sep 2019

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Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2014, for $408,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft’s identifiable assets and liabilities at a collective net fair value of $535,000 and the fair value of the 20 percent noncontrolling interest was $102,000. No excess fair value over book value amortization accompanied the acquisition.

The following selected account balances are from the individual financial records of these two companies as of December 31, 2015:
Protrade Seacraft
Sales $ 650,000 $ 370,000
Cost of goods sold 295,000 202,000
Operating expenses 151,000 106,000
Retained earnings, 1/1/15 750,000 190,000
Inventory 347,000 111,000
Buildings (net) 359,000 158,000
Investment income Not given 0


Each of the following problems is an independent situation:

a.

Assume that Protrade sells Seacraft inventory at a markup equal to 60 percent of cost. Intra-entity transfers were $91,000 in 2014 and $111,000 in 2015. Of this inventory, Seacraft retained and then sold $29,000 of the 2014 transfers in 2015 and held $43,000 of the 2015 transfers until 2016.
Determine balances for the following items that would appear on consolidated financial
statements for 2015:

cost of goods sold:

Inventory:

Net income attributable to noncontrolling interest:

Assume that Seacraft sells inventory to Protrade at a markup equal to 60 percent of cost. Intra-entity transfers were $51,000 in 2014 and $81,000 in 2015. Of this inventory, $22,000 of the 2014 transfers were retained and then sold by Protrade in 2015, whereas $36,000 of the 2015 transfers were held until 2016.
Determine balances for the following items that would appear on consolidated financial statements for 2015:

Cost of goods sold:

Inventory:

Net income attributable to noncontrolling interest:

Protrade sells Seacraft a building on January 1, 2014, for $82,000, although its book value was only $51,000 on this date. The building had a five-year remaining life and was to be depreciated using the straight-line method with no salvage value.

Determine balances for the following items that would appear on consolidated financial statements for 2015:

Buildings:

Operating expenses:

Net income attributable to noncontrolling interest:

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