Problem 1

1 Sales 50,000
Cost of sales 50,000
To eliminate intercompany sales

Cost of sales 10,000

Inventory 10,000
To eliminate unrealized profit in ending inventory

Retained earnings - parent 5,000

Cost of sales 5,000
To recognized realized profit in beginning inventory

2 Reported sales 1,400,000

Intercompany sales (50,000)
Consolidated sales 1,350,000

3 Reported cost of sales 680,000

Intercompany sales (50,000)
Unrealized profit in ending inventory 10,000
Realized profit in beginning inventory (5,000)
Consolidated cost of sales 635,000

Problem 2
1 Consideration 1,620,000
NCI (Proportionate) 330,000
Total 1,950,000
FMV of net assets 1,650,000
Goodwil 300,000

Goodwill, 01/01/2021 300,000

Impairment Loss, 2021 (20,000)
Impairment Loss, 2022 (30,000)
Goodwill, 12/31/2022 250,000

2 P Co. S. Co
Reported net income 1,000,000 500,000
Dividend income -64,000
Additional depreciation (50,000 / 4 years) -12,500
Realized profit on beginning inventory - downstream* 3,200
Unrealized profit on ending inventory - downstream** -6,000
Adjusted net income 933,200 487,500
Share of parent 390,000 -390,000
Impairment Loss -30,000
Consolidated net income 1,293,200 97,500 1,390,700

*RPBI: 19,200 x 20/120

**UPEI: 36,000 x 20/120
Problem 3
1 A. Co. B. Co
Reported net income 376,250 109,375
Dividend income -52,500
Realized profit on beginning inventory - upstream* 3,500
Unrealized profit on ending inventory - upstream** -6,300
Adjusted net income 323,750 106,575
Share of parent 63,945 -63,945
Consolidated net income 387,695 42,630

*RPBI: (87,500 x 20%) x 25/125

**UPEI: (105,000 x 30%) x 25/125

2 Reported Sales 1,531,250

Intercompany sales - 2022 (210,000)
Consolidated sales 1,321,250

Reported Cost of Sales 918,750

Intercompany sales - 2022 (210,000)
Realized profit on beginning inventory - upstream* (3,500)
Unrealized profit on ending inventory - upstream** 6,300
Consolidated cost of sales 711,550

Consolidated gross profit 609,700

Problem 4
1 Black Corp.
Reported net income 560,000
Realized profit on beginning inventory - upstream* 14,250
Adjusted net income 574,250
NCI rate 40%
NCINIS 229,700

RPBI: (285,000 x 30%) x 20/120

2 Realized profit on beginning inventory - upstream 14,250

NCI rate 40%
Realized profit attributable to NCI 5,700

Problem 5
1& 2 Pet Sam
Reported net income 360,000 155,000
Dividend income -42,000
Unrealized loss on sale - upstream 21,000
Realized loss on sale - upstream (21,000/5) x 8/12 -2,800
Unrealized gain on sale - downstream -45,000
Realized gain on sale - downstream (45,000/8) x 4/12 1,875
Adjusted net income 274,875 173,200
Share of parent 138,560 -138,560
 Consolidated net income 413,435 34,640

3 NCI, beg (570,000 + 490,000) x 20% 212,000

Net income attributable to NCI 34,640
Dividends received by the NCI -10,500
NCI, end 236,140

4 Book Value of equipment 105,000 300,000

Depreciation for 2022
(105,000 / 5) x 8/12 (14,000)
(300,000 / 8) x 4/12 (12,500)
Carrying Value, 12/31/2022 91,000 287,500

OR

Selling price of equipment 84,000 345,000

Depreciation for 2022
(84,000 / 5) x 8/12 (11,200)
(345,000 / 8) x 4/12 (14,375)
Unrealized loss on sale - upstream 21,000
Realized loss on sale - upstream (21,000/5) x 8/12 (2,800)
Unrealized gain on sale - downstream (45,000)
Realized gain on sale - downstream (45,000/8) x 4/12 1,875
Carrying Value, 12/31/2022 91,000 287,500

Problem 6
1 P Co. S Co.
Reported Cost of Sales
P: (7,540,000 / 140%); S: (4,760,000 / 140%) 5,385,714 3,400,000
Fair value adjustment for the inventory 200,000
Intercompany sales - 2022 (1,190,000) (602,000)
Unrealized profit on ending inventory - downstream
(1,190,000 x 30%) x 40/140 102,000
Unrealized profit on ending inventory - upstream
(602,000 x 20%) x 40/140 34,400
Consolidated sales 4,297,714 3,032,400

Consolidated cost of sales 7,330,114

2 Pet Sam
Sales 7,540,000 4,760,000
Cost of sales -5,385,714 -3,400,000
Dividend income 35,000
OPEX -1,508,000 -952,000
Reported net income 681,286 408,000
Dividend income -35,000
Fair value adjustment for the inventory -200,000
Unrealized profit on ending inventory - downstream -102,000
Unrealized profit on ending inventory - upstream -34,400
 Adjusted net income 544,286 173,600
Share of parent 138,880 -138,880
Consolidated net income 683,166 34,720

NCI, beg (1.8M / 80%) x 20% 450,000

Net income attributable to NCI 34,720
Dividends received by the NCI -8,750
NCI, end 475,970

Problem 7
Problem 11

P Company

1-Jan Dr. Cash 120,000

Dr. Accumulated Dep 50,000
Cr. Equipment 100,000
Cr. Gain on Sale 70,000

Equipment -

31-Dec

Equipment 100,000
Accumulated Depreciation 60,000
Depreciation Expense 10,000

Solution
P S
Reported net income 300,000 200,000
Dividends from S (40,000)
Net income from own operations 260,000 200,000
Unrealized gain on sale (70,000)
Realized gain 14,000
Total 204,000 200,000
Share of P 160,000 (160,000)
Total 364,000 40,000
 S Company Consolidation
Dr. Gain on Sale
Dr. Equipment 120,000 Cr. Equipment
Cr. Cash 120,000 Cr. Accumulated Depreciation

Dr. Accumulated Depreciatio

Cr. Depreciation Expense
Equipment 120,000

Dr. Depreciation Expense 24,000

Cr. Accumulated Depreciation 24,000

Equipment
Accumulated Depreciation
Depreciation Expense
 70,000
20,000
Depreciation 50,000

14,000
14,000

100,000
60,000
10,000
Parent Subsidiary

Dr. AR 110 Dr. Inventory 110

Cr. Sales 110 Cr. AP

Dr. Cost of Sales 100 Dr. AR - 3rd Party 60.5

Cr. Inventory 100 Cr. Sales

Dr. Cost of Sales 55

Cr. Inventory

Elimination Entries

Dr. Sales 110

Cr. Cost of Sales 110

Dr. Cost of Sales 5

Cr. Inventory 5
 Inventory
110
110 55
5
60.5 50

55
55
100 110 Elim
Elim 5
160 110
50