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 Polar Inc. Icecap Co. Sales Cost of goods sold Operating expenses Retained earnings, 1/1/18 Inventory Buildings (net) Investment income $ 896,000 504,000 276,000 147,000 252,000 154,000 220,000 406,000 210,000 1,036,000 036 000 484,000 501,000 not given Polar sold a building to Icecap on January 1, 2017 for $112,000, although the book value of this asset was only $70,000 on that date. The building had a five-year remaining useful life and was to be depreciated using the straight-line method with no salvage value Required: For the consolidated financial statements for 2018, determine the balances that would appear for the following accounts: (i) Buildings (net); (ii) Operating expenses; and (i) Net income attributable to the noncontrolling interest. Short Answer Toolbar navigation

Solution

a). Buildings account :-

Cost of Building = $70000

Remaining Life = 5 year

Depreciation = $70000 / 5

= $14000

Cost of Building on Dec. 31, 2018 = $70000 - ($14000*2)

= $42000

Markup rate = $112000/$70000 = 1.6 times

Cost of building at markup price on Dec. 31, 2018 = $42000*1.6 = $67200

Balance of Building = $220000 + $42000 - $67200 = $194800

Value of Building for Considered = $194800 * 80% = $155840

Consolidated Value of Building = $501000 + $155840

= $656840

b). Operating Expenses :-

Excess Depreciation for two year = ($112000 - $70000)/5 * 2 = $16800

Excess Depreciation reduce from Operating Expenses,

Operating Expenses = $147000 - $16800

= $130200

Consolideted Balance of operating expense = $210000 + ($130200*80%)

= $210000 + $104160

= $314160

c). Non-Controlling interest in subsidiary\'s net income :-

Net Income = Sales - Cost of goods sold

= $504000 - $276000

= $228000

Subsidiary Net Income = $228000 + ($42000/5)

= $228000 + $8400

= $236400

Non-Controlling Interest = $236400 * (100% - 80%)

= $236400 * 20%

= $47280