Presented below are selected amounts from the separate unconsolidated financial
ID: 2509782 • Letter: P
Question
Presented below are selected amounts from the separate unconsolidated financial statements of Pero Corporation and its 90%-owned subsidiary Sean Company at December 31, 2016. Additional information follows:
Pero Corporation
Sean Company
Selected income statement amounts:
Sales
$ 710,000
$ 530,000
Cost of goods sold
490,000
370,000
Gain on the sale of equipment
21,000
Earnings from investment in subsidiary (equity)
63,000
Other expenses
48,000
75,000
Interest expense
16,000
Depreciation
25,000
20,000
Selected balance sheet amounts:
Cash
30,000
18,000
Inventories
229,000
150,000
Equipment
440,000
360,000
Accumulated depreciation
(200,000)
(120,000)
Investment in Sean (equity balance)
211,000
Investment in bonds
(100,000)
Discount on bonds
(9,000)
Bonds payable
(200,000)
Discount on bonds payable
3,000
Common stock
100,000)
(10,000)
Additional paid-in capital in excess of par
(250,000)
(40,000)
Retained earnings
(402,000)
(140,000)
Selected statement of retained earnings amounts:
Beginning balance, December 31, 2015
272,000
100,000
Net income
210,000
70,000
Dividends paid
80,000
30,000
2. Items (a) through (l) below refer to accounts that may or may not be included in Pero’s consolidated financial statements. The list on the right refers to the various possibilities of those amounts to be reported in Pero’s consolidated financial statements for the year ended December 31, 2016. Consider all transactions stated above in determining your answer. Ignore income tax considerations.
Items to be answered:
Responses to be selected:
a. Cash
b. Equipment
c. Investment in subsidiary
d. Bonds payable
e. NCI
f. Common stock
g. Beginning retained earnings
h. Dividends paid
i. Gain on retirement of bonds j. Cost of goods sold
k. Interest expense
l. Depreciation expense
1. Sum of amounts on Pero’s and Sean’s separate unconsolidated financial statements.
2. Less than the sum of amounts on Pero’s and Sean’s separate unconsolidated financial statements, but not the same as the amount on either.
3. Same as amount for Pero only.
4. Same as amount for Sean only.
5. Eliminated entirely in consolidation.
6. Shown in consolidated financial statements but not in separate unconsolidated financial statements.
7. Neither in consolidated nor in separate unconsolidated financial statements.
Pero Corporation
Sean Company
Selected income statement amounts:
Sales
$ 710,000
$ 530,000
Cost of goods sold
490,000
370,000
Gain on the sale of equipment
21,000
Earnings from investment in subsidiary (equity)
63,000
Other expenses
48,000
75,000
Interest expense
16,000
Depreciation
25,000
20,000
Selected balance sheet amounts:
Cash
30,000
18,000
Inventories
229,000
150,000
Equipment
440,000
360,000
Accumulated depreciation
(200,000)
(120,000)
Investment in Sean (equity balance)
211,000
Investment in bonds
(100,000)
Discount on bonds
(9,000)
Bonds payable
(200,000)
Discount on bonds payable
3,000
Common stock
100,000)
(10,000)
Additional paid-in capital in excess of par
(250,000)
(40,000)
Retained earnings
(402,000)
(140,000)
Selected statement of retained earnings amounts:
Beginning balance, December 31, 2015
272,000
100,000
Net income
210,000
70,000
Dividends paid
80,000
30,000
Explanation / Answer
Ans:
a. Cash - Sum of amounts on Pero’s and Sean’s separate unconsolidated financial statements.
b. Equipment - Sum of amounts on Pero’s and Sean’s separate unconsolidated financial statements.
c. Investment in subsidiary - Eliminated entirely in consolidation.
d. Bonds payable - Same as amount for Sean only.
e. NCI - Shown in consolidated financial statements but not in separate unconsolidated financial statements
f. Common stock - Same as amount for Pero only
g. Beginning retained earnings - Sum of amounts on Pero’s and Sean’s separate unconsolidated financial statements.
h. Dividends paid - Less than the sum of amounts on Pero’s and Sean’s separate unconsolidated financial statements, but not the same as the amount on either.
i. Gain on retirement of bonds - Same as amount for Pero only
j. Cost of goods sold - Neither in consolidated nor in separate unconsolidated financial statements.
k. Interest expense - Sum of amounts on Pero’s and Sean’s separate unconsolidated financial statements
l. Depreciation expense - Sum of amounts on Pero’s and Sean’s separate unconsolidated financial statements
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