Pitino acquired 90percent of Brey's outstanding shares on January 1, 2016, inexchange for $405,000 in cash. The subsidiary's stockholders'equity accounts totaled $389,000 and the noncontrolling interesthad a fair value of $45,000 on that day. However, a building (witha nine-year remaining life) in Brey's accounting records wasundervalued by $27,000. Pitino assigned the rest of the excess fairvalue over book value to Brey's patented technology (four-yearremaining life).
Brey reported netincome from its own operations of $71,000 in 2016 and $87,000 in2017. Brey declared dividends of $22,500 in 2016 and $26,500 in2017.
| Year | Cost to Brey | Transfer Price to Pitino | Inventory Remaining atYear-End |
| 2016 | $76,000 | $150,000 | $32,000 |
| 2017 | $102,000 | $170,000 | $44,500 |
| 2018 | $126,750 | $195,000 | $70,000 |
At December 31, 2018,Pitino owes Brey $23,000 for inventory acquired during theperiod.
The following separateaccount balances are for these two companies for December 31, 2018,and the year then ended.
Note: Parenthesesindicate a credit balance.
| Pitino | Brey |
| Sales Revenue | (876,000) | (401,000) |
| COGS | 522,000 | 216,000 |
| Expenses | 186,1000 | 72,000 |
| Equity in earnings ofBrey | (85,320) | 0 |
| Net Income | (253,220) | (113,000) |
| Retained Earnings, 1/1/18 | (502,000) | (292,000) |
| Net Income (above) | (253,220) | (113,000) |
| Dividends declared | 136,000 | 26,000 |
| Retained Earnings,12/31/18 | (619,220) | (379,000) |
| Cash and Receivables | 153,000 | 105,000 |
| Inventory | 290,000 | 171,000 |
| Investment in Brey | 528,300 | 0 |
| Land, buildings, and equipment(net) | 971,000 | 335,000 |
| Total Assets | 1,942,300 | 611,000 |
| Liabilities | (773,080) | (26,000) |
| Common Stock | (550,000) | (206,000) |
| Retained Earnings,12/31/18 | (619,220) | (379,000) |
| Total Liabilities andEquity | (1,942,300) | (611,000) |
What amounts make upthe $85,320 Equity Earnings of Brey account balance for 2018?
What is the net incomeattributable to the noncontrolling interest for 2018?
What amounts make upthe $528,300 Investment in Brey account balance as of December 31,2018?
Prepare the 2018worksheet entry to eliminate the subsidiary’s beginning owners’equity balances.
Without preparing aworksheet or consolidation entries, determine the consolidationbalances for these two companies.
