Problem 5-27 (LO 5-1, 5-2, 5-3, 5-4, 5-5, 5-7)

Pitino acquired 90 percent of Brey's outstanding shares onJanuary 1, 2016, in exchange for $513,000 in cash. The subsidiary'sstockholders' equity accounts totaled $497,000 and thenoncontrolling interest had a fair value of $57,000 on that day.However, a building (with a ten-year remaining life) in Brey'saccounting records was undervalued by $51,000. Pitino assigned therest of the excess fair value over book value to Brey's patentedtechnology (five-year remaining life).

Brey reported net income from its own operations of $83,000 in2016 and $99,000 in 2017. Brey declared dividends of $28,500 in2016 and $32,500 in 2017.

Year	Cost to Brey			Transfer Price to Pitino			Inventory Remaining at Year-End (at transfer price)
2016	$	88,000		$	210,000		$	44,000
2017		161,000			230,000			56,500
2018		127,500			255,000			55,000

At December 31, 2018, Pitino owes Brey $35,000 for inventoryacquired during the period.

The following separate account balances are for these twocompanies for December 31, 2018, and the year then ended.

Note: Parentheses indicate a credit balance.

	Pitino				Brey
Salesrevenues	$	(900,000	)		$	(461,000	)
Cost of goodssold		534,000				228,000
Expenses		187,300				96,000
Equity inearnings of Brey		(105,255	)			0
Net income	$	(283,955	)		$	(137,000	)
Retainedearnings, 1/1/18	$	(526,000	)		$	(316,000	)
Net income(above)		(283,955	)			(137,000	)
Dividendsdeclared		148,000				55,000
Retainedearnings, 12/31/18	$	(661,955	)		$	(398,000	)
Cash andreceivables	$	165,000			$	117,000
Inventory		350,000				255,000
Investment inBrey		645,300				0
Land, buildings,and equipment (net)		983,000				347,000
Totalassets	$	2,143,300			$	719,000
Liabilities	$	(871,345	)		$	(19,000	)
Commonstock		(610,000	)			(302,000	)
Retainedearnings, 12/31/18		(661,955	)			(398,000	)
Totalliabilities and equity	$	(2,143,300	)		$	(719,000	)

What was the annual amortization resulting from theacquisition-date fair-value allocations?

Were the intra-entity transfers upstream or downstream?

What intra-entity gross profit in inventory existed as ofJanuary 1, 2018?

What intra-entity gross profit in inventory existed as ofDecember 31, 2018?

What amounts make up the $105,255 Equity Earnings of Breyaccount balance for 2018?

What is the net income attributable to the noncontrollinginterest for 2018?

What amounts make up the $645,300 Investment in Brey accountbalance as of December 31, 2018?

Prepare the 2018 worksheet entry to eliminate the subsidiary’sbeginning owners’ equity balances.

Without preparing a worksheet or consolidation entries,determine the consolidation balances for these two companies.