Selected information from the separate and consolidated balance sheets and income statements of Palo Alto, Inc. and its subsidiary, Stanford Co., as of December 31, 20X1, and for the year then ended is as follows:
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Palo Alto
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Stanford
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Consolidated
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Balance sheet accounts:
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Accounts receivable
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$ 26,000
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$ 19,000
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$ 42,000
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Inventory
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30,000
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25,000
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50,000
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Investment in Stanford
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67,000
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--
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--
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Stockholders' equity
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154,000
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50,000
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154,000
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Income statement accounts:
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Revenues
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$200,000
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$140,000
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$300,000
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Cost of goods sold
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150,000
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110,000
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225,000
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Gross profit
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50,000
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30,000
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75,000
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Equity in earnings of Stanford
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$ 9,000
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--
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--
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Net income
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$ 36,000
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$ 20,000
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$ 36,000
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Additional information:
During 20X1, Palo Alto sold goods to Stanford at the same markup on cost that Palo Alto uses for all sales. At December 31, 20X1, Stanford had not paid for all of these goods and still held 50% of them in inventory.
Palo Alto acquired its interest in Stanford five years earlier (as of December 31, 20X1).
Required:
For each of the following items, calculate the required amount.
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a.
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The amount of intercompany sales from Palo Alto to Stanford during 20X1.
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b.
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The amount of Stanford's payable to Palo Alto for intercompany sales as of December 31, 20X1.
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c.
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In Palo Alto's December 31, 20X1, consolidated balance sheet, the carrying amount of the inventory that Stanford purchased from Palo Alto.
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9-10. On January 1, 20X1, Pinto Company purchased an 80% interest in Sands Inc. for $1,000,000. The equity balances of Sands at the time of the purchase were as follows:
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Common stock ($10 par)
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$100,000
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Paid-in capital in excess of par
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400,000
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Retained earnings
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500,000
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Any excess of cost over book value is attributable to goodwill.
No dividends were paid by either firm during 20X6. The following trial balances were prepared for Pinto Company and its subsidiary, Sands Inc., on December 31, 20X6:
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Pinto
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Sands
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Cash
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120,000
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70,000
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Accounts receivable
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240,000
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197,000
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Inventory
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200,000
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176,000
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Land
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600,000
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180,000
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Buildings and equipment
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1,100,000
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800,000
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Accumulated depreciation
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(180,000)
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(120,000)
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Investment in Sands
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1,000,000
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Accounts payable
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(110,000)
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(50,000)
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Common stock, $10 par
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(800,000)
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(100,000)
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Paid-in capital in excess of par
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(660,000)
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(400,000)
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Retained earnings
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(1,340,000)
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(650,000)
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Sales
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(600,000)
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(300,000)
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Other income
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(40,000)
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(15,000)
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Cost of goods sold
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320,000
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180,000
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Other expenses
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150,000
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32,000
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Total
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-
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-
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Sands sold a machine to Pinto Company for $40,000 on January 1, 20X6. The machine cost Sands $50,000, and $25,000 of accumulated depreciation had been recorded as of the sale date. The machine had a 5-year remaining life and no salvage value. Pinto Company is using straight-line depreciation.
Since the purchase date, Pinto has sold merchandise for resale to Sands, Inc. at a mark-up on cost of 25%. Sales during 20X6 were $150,000. The inventory of these goods held by Sands was $15,000 on January 1, 20X6, and $18,000 on December 31, 20X6.
Required:
Prepare a consolidated income statement for 20X6, including income distribution schedules to support your distribution of income to the noncontrolling and controlling interest interests.
here is the template
6-8.
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c.
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Intercompany sales = $
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% held as ending interco. inventory
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$
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Gross profit ( %)
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( )
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Cost of interco ending inventory
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$
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9-10
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Pinto Company and Subsidiary Sands Inc.
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Consolidated Income Statement
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For the Year Ended December 31, 20X6
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Sales ( )
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$
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Cost of goods sold ( )
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________
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Gross profit
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$
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Other expenses ($ $ $ )
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_________
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Operating income
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$
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Other income ($ $ $ )
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________
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Consolidated Net Income
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$ .
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Distribution of Consolidated Net Income:
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Noncontrolling interest
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$
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Controlling interest
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$
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Subsidiary Sands Inc. Income Distribution
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Deferred gain on sale
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Internally generated
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of machine
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$
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net income
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$
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Gain on sale of machine
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realized through use
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Adjusted income
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$
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Noncontrolling share
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%
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Noncontrolling interest
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$ .
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Parent Pinto Company Income Distribution
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Deferred profit in
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Internally generated
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ending inventory
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$
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net income
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$
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Realized profit in
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beginning inventory
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% Sands adjusted
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income of $
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Controlling interest
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$ .
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