On January 1, 2013, Spears had common stock of $270,000 and retained earnings of $410,000. During that year, Spears reported sales of $280,000, cost of goods sold of $145,000, and operating expenses of $55,000.
On January 1, 2011, Pitbull, Inc., acquired 80 percent of Spears’s outstanding voting stock. At that date, $75,000 of the acquisition-date fair value was assigned to unrecorded contracts (with a 20-year life) and $35,000 to an undervalued building (with a 10-year life).
In 2012, Spears sold inventory costing $15,000 to Pitbull for $30,000. Of this merchandise, Pitbull continued to hold $9,000 at year-end. During 2013, Spears transferred inventory costing $15,750 to Pitbull for $35,000. Pitbull still held half of these items at year-end.
On January 1, 2012, Pitbull sold equipment to Spears for $19,500. This asset originally cost $31,000 but had a January 1, 2012, book value of $12,000. At the time of transfer, the equipment’s remaining life was estimated to be five years.
Pitbull has properly applied the equity method to the investment in Spears.
Entry G
Entry TA
Entry S
Entry A
Entry I
Entry E
Entry TI
Entry G
Entry ED
b. Compute the noncontrolling interest in the subsidiary’s net income for 2013.
Noncontrolling interest in subsidiary's net income
a. Prepare worksheet entries to consolidate these two companies as of December 31, 2013.