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Bee Company acquired, on January 1, 2022, 2,000 shares (80%) of the common stock of Cee company in the open market, paying $35 per share. At the date of acquisition all assets and liabilities of Cee were recorded at their fair market values and Cees shareholders equity consisted of $62,500 common stock ($25 par) and $20,000 of retained earnings. Any excess of cost of book value was allocated to a previously unrecorded patent with an estimated remaining life of 20 years. The financial statements for both companies, as of December 31, 2023, are on the attached worksheet.

Additional Information

1. Cee acquires all of its merchandise from Bee at 20% above cost.
2. Intercompany transfers of inventory to Cee from during 2023 totaled $36,000.
3. The 20x3 beginning inventory of Cee included intercompany gross margin of $4,000.
4. Cee reported net income of $20,000 and dividend payments of $5,000 in 2022.

On the answer sheet, please provide:

1. Calculate (or indicate) the intercompany sales and deferred gross profit for both beginning and ending downstream inventories.
2. Calculate the Implied Fair Market Value.
3. Calculate Goodwill (if any)
4. Calculate the Income from Sub.
5. Calculate the Investment Account.
6. Finish the attached Consolidation

Bee Cee DR CR CONS $80,000 Income Statement Sales Income from Sub. Cost of Goods Sold $150,000 11200 - 70000 -42000 Operating Expenses NCI -35000 25000 Net Income $56,200 $13,000 Statement of RE Retained Earnings 1/1/23 Net Income Dividends 95000 $56,200 - 15000 35000 - 25000 -6000 Retained Earnings 12/21/23 $136,200 $4,000 Balance Sheet Assets Cash Accounts Receivable Inventory 52000 40000 50000 24,500 32000 18000 Investment in Cee 84200 110000 50000 Building (net) Patents Total Assets 336200 124500 Liabilities and SE Accounts Payable Common Stock Retained Earnings NCI 1/1/23 NCI 12/31/23 Total Liabilites and SE 50000 150000 136200 20000 62500 42000 336200 124500 Bee Cee DR CR CONS $80,000 Income Statement Sales Income from Sub. Cost of Goods Sold $150,000 11200 - 70000 -42000 Operating Expenses NCI -35000 25000 Net Income $56,200 $13,000 Statement of RE Retained Earnings 1/1/23 Net Income Dividends 95000 $56,200 - 15000 35000 - 25000 -6000 Retained Earnings 12/21/23 $136,200 $4,000 Balance Sheet Assets Cash Accounts Receivable Inventory 52000 40000 50000 24,500 32000 18000 Investment in Cee 84200 110000 50000 Building (net) Patents Total Assets 336200 124500 Liabilities and SE Accounts Payable Common Stock Retained Earnings NCI 1/1/23 NCI 12/31/23 Total Liabilites and SE 50000 150000 136200 20000 62500 42000 336200 124500

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