Computations of separate and consolidated statements given


Question Description:

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Computations of separate and consolidated statements given Pet Corporation acquired an 80 percent interest in She Corporation on January 1, 2011, for $320,000, at which time She had capital stock of $200,000 outstanding and retained earnings of $100,000. The price paid reflected a $100,000 undervaluation of She’s plant and equipment. The plant and equipment had a remaining useful life of eight years when Pet acquired its interest. Separate and consolidated financial statements for Pet Corporation and its subsidiary, She Corporation, for the year ended December 31, 2013, are as follows: Pet She Consolidated Combined Income and Retained Earnings Statement for the Year Ended December 31, 2013 Sales $ 180,000 $100,000 $230,000 Income from She 20,000 — — Interest income — 8,000 — Cost of goods sold (110,000) (60,000) (110,000) Operating expenses (30,000) (18,000) (58,000) Interest expense (18,000) — (9,000) Loss — — (3,000) Noncontrolling interest share — — (8,000) Controlling share of net income 42,000 30,000 42,000 Add: Beginning retained earnings 294,000 135,000 294,000 Deduct: Dividends (20,000 ) (15,000 ) (20,000 ) Ending retained earnings $ 316,000 $150,000 $316,000 Balance Sheet at December 31, 2013 Cash $ 60,000 $ 26,000 $ 86,000 Accounts receivable 120,000 $ 60,000 165,000 Inventories 100,000 50,000 140,000 Plant and equipment 500,000 200,000 780,000 Accumulated depreciation (100,000) (50,000) (180,000) Investment in She stock 320,000 — — Investment in Pet bonds — 104,000 — Total assets $1,000,000 $390,000 $991,000 Accounts payable $ 80,000 $ 40,000 $105,000 10% bonds payable 204,000 — 102,000 Common stock 400,000 200,000 400,000 Retained earnings 316,000 150,000 316,000 Noncontrolling interest — — 68,000 Total equities $1,000,000 $390,000 $991,000 She sells merchandise to Pet but never purchases from Pet. On January 1, 2013, She purchased $100,000 par of 10 percent Pet Corporation bonds for $106,000. These bonds mature on December 31, 2015, and She expects to hold the bonds until maturity. Both She and Pet use straight-line amortization. Interest is payable on December 31. REQUIRED: Show computations for each of the following items: 1. The $3,000 loss in the consolidated income statement 2. The $230,000 consolidated sales 3. Consolidated cost of goods sold of $110,000 4. Intercompany profit in beginning inventories 5. Intercompany profit in ending inventories 6. Consolidated accounts receivable of $165,000 7. Noncontrolling interest share of $8,000 8. Noncontrolling interest at December 31, 2013 9. Investment in She stock at December 31, 2012 10. Investment income account of $20,000 (Pet’s books)

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