Question

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

	Allister		Barone
Inventory	$	410,000	$	210,000
Sales		820,000		620,000
Investment income		not given
Cost of goods sold		410,000		310,000
Operating expenses		185,000		255,000

Allister acquired 80 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 $60,000 that was unrecorded on its accounting records and had a 4-year remaining life. Any remaining excess fair value over Barone's book value was attributed to goodwill. During 2018, Barone sells inventory costing $121,000 to Allister for $162,000. Of this amount, 10 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:

	Amounts
Inventory
Sales
Cost of goods sold
Operating expenses
Net income attributable to noncontrolling interest

Answer 1

Particular	Amount
Inventory	$615,900
Sales	$1,278,000
Cost of Goods sold	$562,100
Operating expenses	$455,000
Net Income attributable to non controlling interest	$3,590

Working notes

Amortization expense= $60,000/4 = $15,000

Intra entity transfer = $162,000

Intra entity gross profit =($162,000-$121,000) = $41,000

Inventory at end = 10%

Unrealized Intra entity profit = $41,000*10% = $4,100

Inventory = ($410,000+$210,000-$4,100)=$615,900

Sales = ($820,000+$620,000-$162,000) =$1, 278,000

Cost of good sold = ($410,000+$310,000-$162,000+$4,100)

=$562,100

Operating Expense = ($185,000+$255,000+$15,000) = $455,000

Net income attributable to non controlling interest =

10%($55,000 - $15,000-$4,100)

=$3,590