Required information Several years ago Polar Inc acquired an

Required information Several years ago Polar Inc. acquired an 80% interest in Icecap Co. The book values of Icecap\'s asset and liability accounts at that time were considered to be equal to their fair values. Polar\'s acquisition value corresponded to the underlying book value of Icecap so that no allocations or goodwill resulted from the transfer The following selected account balances were from the individual financial records of these two companies as of December 31, 2018 Sales Cost of goods sold Operating expenses Retained earnings, 1/1/18 Inventory Buildings (net) Investment income Polar Inc. Icecap Co $ 896,000 504,000 276,000 147,000 252,000 154,000 220,000 406,000 210,000 1,036,000 484,000 501,000 not given Assume that icecap sold inventory to Polar at a markup equal to 25% of cost. Intra-entity transfers were $70,000 in 2017 and $112,000 in 2018, Of this inventory, $29,000 of the 2017 transfers were retained and then sold by Polar in 2018, whereas $49,000 of the 2018 transfers was held until 2019. Required For the consolidated financial statements for 2018, determine the balances that would appear for the following accounts: () Cost of Goods Sold; (i) Inventory; and (iii) Net income attributable to the noncontrolling interest.

Solution

Consolidated Cost of Goods Sold     Polar Inc’s book value $406,000     Icecap Co’s book value 276,000     Elimination of 20X8 intercompany purchases -112,000     Reduction of beginning inventory because of 20X7 unrealized gain     ($29,400/125% = $23,520 cost; transfer price less $29,400 cost =         -5,880        $23,520 unrealized gain )     Reduction of ending inventory because of 20X8unrealized gain     ($49,000/125% = $39,200 cost; transfer price less $49,000 9,880        Transfer price less $39,200 cost = $9,800 unrealized gain ) Consolidated cost of goods sold $574,000 Consolidated Inventory     Polar Inc.’s book value $484,000     Icecap Co’s book value 154,000      Eliminate ending unrealized gain (from above) -9,880     Consolidated inventory $628,120 Non-controlling Interest in Subsidiary’s Net Income    Icecap’s reported net income $81,000    20X7 unrealized gain realized in 20X8(from above) 5,880    20X8 unrealized gain to be realized in 20X8 (from above) -9,880 $77,000    Non-controlling interest percentage X    20% Non-controlling interest in subsidiary’s net income $15,400