C5-1 Several years ago Polar Inc. acquired an 80% interest in Icecap Co. The boo
ID: 2521557 • Letter: C
Question
C5-1 Several years ago Polar Inc. acquired an 80% interest in Icecap Co. The book values of Icecap's asset and liability accounts at that time were considered to be equal to their fair values. Polar’s acquisition value corresponded to the underlying book value of Icecap so that no allocations or goodwill resulted from the transaction.
The following selected account balances were from the individual financial records of these two companies as of December 31, 2013:
Assume that Polar sold inventory to Icecap at a markup equal to 25% of cost. Intra-entity transfers were $130,000 in 2012 and $165,000 in 2013. Of this inventory, $39,000 of the 2012 transfers were retained and then sold by Icecap in 2013, while $55,000 of the 2013 transfers were held until 2014.
Required:
For the consolidated financial statements for 2013, determine the balances that would appear for the following accounts: (1) Cost of Goods Sold, (2) Inventory, and (3) Non-controlling Interest in Subsidiary's Net Income.
Polar Inc lcecap Sales Cost of goods sol d Operating expenses Retained earnings, 1/1/13 Inventory Buildings (net] Investment income $ 896,000 $504,000 276,000 147,000 252,000 154,000 220,000 406,000 210,000 1,036,000 484,000 501,000 not givenExplanation / Answer
Consolidation eliminationentries to be passed as follows:
1
a) Dr Sales 165000
Cr Inter Company 165000
Being sale of Goods reversed by Icecap
Dr Inter Company 165000
Cr COGS 165000
Being Purchase by Polar reversed
b) Since Inter CompanyBuilding was sold on January 1, 2010. The inter company eliminationwas done on
December 31, 2010. Hence no entry as onDecember 31, 2012
c) Since Inter CompanyLand was sold on January 1, 2009. The inter company elimination wasdone on
December 31, 2009. Hence no entry as onDecember 31, 2012
2.
schedule showing thenoncontrolling interest in the consolidated 2012 netincome.
Net Income for the year 2012 ofIcecap
Sales 504,000
Cost of goods sold 276,000
Operating Expenses 147,000
Net Income 81,000
Non Controlling share 20 percent16,200
3.
a) No entry requiredsince no inter company sale in 2013.
b) Since Inter CompanyBuilding was sold on January 1, 2010. The inter company eliminationwas done on
December 31, 2010. Hence no entry as onDecember 31, 2013
c) Since Inter CompanyLand was sold on January 1, 2009. The inter company elimination wasdone on
December 31, 2009. Hence no entry as onDecember 31, 2013
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