ProForm acquired 60 percent of ClipRite on June 30, 2017, for $960,000 in cash. Based on...

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ProForm acquired 60 percent of ClipRite on June 30, 2017, for$960,000 in cash. Based on ClipRite's acquisition-date fair value,an unrecorded intangible of $700,000 was recognized and is beingamortized at the rate of $17,000 per year. No goodwill wasrecognized in the acquisition. The noncontrolling interest fairvalue was assessed at $640,000 at the acquisition date. The 2018financial statements are as follows:
ProForm ClipRite
Sales $ (870,000 ) $ (740,000 )
Cost of goods sold 570,000 435,000
Operating expenses 170,000 135,000
Dividend income (30,000 ) 0
Net income $ (160,000 ) $ (170,000 )
Retained earnings, 1/1/18 $ (1,600,000 ) $ (920,000 )
Net income (160,000 ) (170,000 )
Dividends declared 170,000 50,000
Retained earnings, 12/31/18 $ (1,590,000 ) $ (1,040,000 )
Cash and receivables $ 470,000 $ 370,000
Inventory 360,000 770,000
Investment in ClipRite 960,000 0
Fixed assets 1,700,000 950,000
Accumulated depreciation (300,000 ) (100,000 )
Totals $ 3,190,000 $ 1,990,000
Liabilities $ (800,000 ) $ (150,000 )
Common stock (800,000 ) (800,000 )
Retained earnings, 12/31/18 (1,590,000 ) (1,040,000 )
Totals $ (3,190,000 ) $ (1,990,000 )
ClipRitesold ProForm inventory costing $76,000 during the last six monthsof 2017 for $160,000. At year-end, 30 percent remained. ClipRitesells ProForm inventory costing $235,000 during 2018 for $320,000.At year-end, 10 percent is left. With these facts, determine theconsolidated balances for the following
ClipRite sold ProForm inventory costing $76,000 during the last sixmonths of 2017 for $160,000. At year-end, 30 percent remained.ClipRite sells ProForm inventory costing $235,000 during 2018 for$320,000. At year-end, 10 percent is left. With these facts,determine the consolidated balances for the following:
Consolidated Totals
Sales
Cost of Goods Sold
Operating Expenses
Dividend Income
Inventory
Non-Controlling Interest in Subsidiary, 12/31/18
Net Income attributable to Noncontrolling Interest

Answer & Explanation Solved by verified expert

4.5 Ratings (785 Votes)


We need to pass the following journl entry as workpaper elimination for incompany goods transacion in 2018
			Amount in $
Date	Account Title and Explanation		Debit	Credit
December 31, 2018	Intercompany sales		320000
	Retained earning(Profit in beginning inventory)		25200		=30%*(160000-76000)
		Intercompany cost of goods sold		235000
		Cost of goods sold(Intercompany profit in cost of goods sold)		101700	=90%(320000-235000)+30%(160000-76000)
		Ending Inventory(profit in ending inventory)		8500	=90%*(320000-235000)


	Calculation
		Beginning inventory	48000		=160000*30%
		Purchases	320000
		Cost of goods available for sale	368000
		Ending Inventory	32000
		Cost of goods sold(COGS)	336000
		Intercompany profit in COGS	101700		=90%(320000-235000)+30%(160000-76000)
		Intercompany profit in ending inventory	8500		=10%*(320000-235000)



Requirement

			Proform	Clipride	Conolidation		Consolidated
					Debit	Credit
		Sales	-870000	-740000	320000		-1290000
		Cost of goods sold	570000	435000		336700	668300
		Operating expenses	170000	135000	17000		322000
		Dividend Income	30000			30000	0
		Inventory	360000	770000		8500	1121500

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Transcribed Image Text

ProForm acquired 60 percent of ClipRite on June 30, 2017, for$960,000 in cash. Based on ClipRite's acquisition-date fair value,an unrecorded intangible of $700,000 was recognized and is beingamortized at the rate of $17,000 per year. No goodwill wasrecognized in the acquisition. The noncontrolling interest fairvalue was assessed at $640,000 at the acquisition date. The 2018financial statements are as follows:ProFormClipRiteSales$(870,000)$(740,000)Cost of goods sold570,000435,000Operating expenses170,000135,000Dividend income(30,000)0Net income$(160,000)$(170,000)Retained earnings, 1/1/18$(1,600,000)$(920,000)Net income(160,000)(170,000)Dividends declared170,00050,000Retained earnings, 12/31/18$(1,590,000)$(1,040,000)Cash and receivables$470,000$370,000Inventory360,000770,000Investment in ClipRite960,0000Fixed assets1,700,000950,000Accumulated depreciation(300,000)(100,000)Totals$3,190,000$1,990,000Liabilities$(800,000)$(150,000)Common stock(800,000)(800,000)Retained earnings, 12/31/18(1,590,000)(1,040,000)Totals$(3,190,000)$(1,990,000)ClipRitesold ProForm inventory costing $76,000 during the last six monthsof 2017 for $160,000. At year-end, 30 percent remained. ClipRitesells ProForm inventory costing $235,000 during 2018 for $320,000.At year-end, 10 percent is left. With these facts, determine theconsolidated balances for the followingClipRite sold ProForm inventory costing $76,000 during the last sixmonths of 2017 for $160,000. At year-end, 30 percent remained.ClipRite sells ProForm inventory costing $235,000 during 2018 for$320,000. At year-end, 10 percent is left. With these facts,determine the consolidated balances for the following:Consolidated TotalsSalesCost of Goods SoldOperating ExpensesDividend IncomeInventoryNon-Controlling Interest in Subsidiary, 12/31/18Net Income attributable to Noncontrolling Interest

	ProForm			ClipRite
Sales	$	(870,000	)	$	(740,000	)
Cost of goods sold		570,000			435,000
Operating expenses		170,000			135,000
Dividend income		(30,000	)		0
Net income	$	(160,000	)	$	(170,000	)
Retained earnings, 1/1/18	$	(1,600,000	)	$	(920,000	)
Net income		(160,000	)		(170,000	)
Dividends declared		170,000			50,000
Retained earnings, 12/31/18	$	(1,590,000	)	$	(1,040,000	)
Cash and receivables	$	470,000		$	370,000
Inventory		360,000			770,000
Investment in ClipRite		960,000			0
Fixed assets		1,700,000			950,000
Accumulated depreciation		(300,000	)		(100,000	)
Totals	$	3,190,000		$	1,990,000
Liabilities	$	(800,000	)	$	(150,000	)
Common stock		(800,000	)		(800,000	)
Retained earnings, 12/31/18		(1,590,000	)		(1,040,000	)
Totals	$	(3,190,000	)	$	(1,990,000	)

	Consolidated Totals
Sales
Cost of Goods Sold
Operating Expenses
Dividend Income
Inventory
Non-Controlling Interest in Subsidiary, 12/31/18
Net Income attributable to Noncontrolling Interest