1) P Company owns an 80% int erest in S Company. During 2017 , S sells merchandi
ID: 2501555 • Letter: 1
Question
1) P Company owns an 80% interest in S Company. During 2017, S sells merchandise to P for $200,000 at a profit of $40,000. On December 31, 2017, 50% of this merchandise is included in P’s inventory. Income statements for P and S are summarized below:
P
S
Sales
$1,200,000
$600,000
Cost of Sales
(600,000)
(400,000)
Operating Expenses
(300,000)
(80,000)
Net Income (2017)
$300,000
$120,000
Controlling and non-controlling interest in consolidated net income for 2017?
2)
P Corporation acquired a 60% interest in S Corporation on January 1, 2017, at book value equal to fair value. During 2017, P sold merchandise that cost $225,000 to S for $315,000. One-third of this merchandise remained in S’s inventory at December 31, 2017. S reported net income of $200,000 for 2017. P’s income from S for 2017 is:
a) $60,000.
b) $90,000.
c) $120,000.
d) $102,000.
3)P Company regularly sells merchandise to its 80%-owned subsidiary, S Corporation. In 2016, P sold merchandise that cost $192,000 to S for $240,000. Half of this merchandise remained in S’s December 31, 2016 inventory. During 2017, P sold merchandise that cost $300,000 to S for $375,000. Forty percent of this merchandise inventory remained in S’s December 31, 2017 inventory. Selected income statement information for the two affiliates for the year 2017 is as follows:
P
S
Sales Revenue
$1,800,000
$900,000
Cost of Goods Sold
1,440,000
750,000
Gross profit
$ 360,000
$150,000
Consolidated sales revenue for P and Subsidiary for 2017 are:
a) $2,325,000.
b) $2,400,000.
c) $2,565,000.
d) $2,700,000.
And also
Consolidated cost of goods sold for P Company and Subsidiary for 2017 are:
a) $1,809,000.
b) $1,815,000.
c) $1,821,000.
d) $2,190,000.
4) P Company owns an 80% interest in S Company. During 2017, S sells merchandise to P for $150,000 at a profit of $30,000. On December 31, 2017, 50% of this merchandise is included in P’s inventory. Income statements for P and S are summarized below:
P
S
Sales
$900,000
$450,000
Cost of Sales
(450,000)
(300,000)
Operating Expenses
(225,000)
( 60,000)
Net Income (2017)
$225,000
$ 90,000
Controlling interest in consolidated net income for 2017 is:
a) $225,000.
b) $285,000.
c) $297,000.
d) $315,000.
Noncontrolling interest in income for 2017 is:
a) $3,000.
b) $14,400.
c) $15,000.
d) $18,000.
P
S
Sales
$1,200,000
$600,000
Cost of Sales
(600,000)
(400,000)
Operating Expenses
(300,000)
(80,000)
Net Income (2017)
$300,000
$120,000
Explanation / Answer
1) Controlling interest in consolidated net income for 2017=$380,000 & Non controlling interest in consolidated net income for 2017=$20,000
2) P’s income from S for 2017 = c) $120,000
3) Consolidated sales revenue for P and Subsidiary for 2017= a) $2,325,000.
4) Controlling interest in consolidated net income for 2017= b) $285,000 & Noncontrolling interest in income for 2017 = c) $15,000.
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