Question

Following are several figures reported for Allister and Barone as of December 31, 2018:

	Allister		Barone
Inventory	$	430,000	$	230,000
Sales		860,000		660,000
Investment income		not given
Cost of goods sold		430,000		330,000
Operating expenses		195,000		265,000

Allister acquired 70 percent of Barone in January 2017. In allocating the newly acquired subsidiary's fair value at the acquisition date, Allister noted that Barone had developed a customer list worth $64,000 that was unrecorded on its accounting records and had a 5-year remaining life. Any remaining excess fair value over Barone's book value was attributed to goodwill. During 2018, Barone sells inventory costing $123,000 to Allister for $166,000. Of this amount, 20 percent remains unsold in Allister's warehouse at year-end.

Determine balances for the following items that would appear on Allister's consolidated financial statements for 2018:

Answer 1

Answer :

Inventory	651400
Sales	1354000
Cost of goods sold	602600
Operatin expenses	472800
Net income attributable to non controlling interest	-

Explanation :

Customer list amortization = $64000 / 5 Years = 12800 per year

Intra - Entity gross profit ($166000 - $123000)	$43000
Inventory remaining at year end	20%
Unrealized intra - entity gross profit 12/31	$8600

Inventory = book value of allister and barone - Unrealized gross profit

= 430000 + 230000 -8600 = $651400

Sales = book value of allister and barone - intra entity transfer

= 860000 + 660000 - 166000 = $1354000

Cost of goods sold = book value of allister and barone + unrealized gross profit - intra entity transfer

= 430000 + 330000 + 8600 - 166000 = $602600

Operating expenses = book values of allister and barone + amortization expenses for the period

= 195000 + 265000 + 12800 = $472800

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