Problem:
Asphalt acquired 70 percent of Broadway on June 11, 1993. Based on the purchase price, an intangible of $300,000 was recognized and is being amortized at the rate of $10,000 per year. The 2004 financial statements are as follows:
Asphalt Broadway
Sales $800,000 $600,000
Cost of goods sold (535,000) (400,000)
Operating expenses (100,000) (100,000)
Dividend income 35,000 -
Net income $200,000 $100,000
Retained earnings, 1/1/04 $1,300,000 $850,000
Net income 200,000 100,000
Dividends paid (100,000) (50,000)
Retained earnings, 12/31/04 $1,400,000 $900,000
Cash and receivables $400,000 $300,000
Inventory 298,000 700,000
Investment in Broadway 902,000 -
Fixed assets 1,000,000 600,000
Accumulated depreciation (300,000) (200,000)
Totals $2,300,000 $1,400,000
Liabilities $600,000 $400,000
Common stock 300,000 100,000
Retained earnings 1,400,000 900,000
Totals $2,300,000 $1,400,000
Asphalt sells inventory costing $72,000 to Broadway during 2003 for $120,000. At year's end, 30 percent is left. Asphalt sells inventory costing $200,000 to Broadway during 2004 for $250,000. At year's end, 20 percent is left. Under these circumstances, determine the consolidated balances for the following sales accounts:
Sales
Cost of Goods Sold
Operating Expenses
Dividend Income
Noncontrolling Interest in Consolidated Income
Inventory
Noncontrolling Interest in Subsidiary, 12/31/04
Compute the balances in problem above, assuming that the intercompany transfers were all made from Broadway to Asphalt.