Full Test Bank Chapter 5 Financial Statements Intra-Entity

Student name:__________

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.
1) On October 6, 2021, Ronan Corp. sold land to Bane Co., its wholly owned subsidiary. The land cost $72,400 and was sold to Bane for $96,000. For consolidated financial statement reporting purposes, when must the gain on the sale of the land be recognized?

A) Proportionately over a designated period of years.
B) When Bane Co. sells the land to a third party.
C) No gain may be recognized.
D) As Bane uses the land.
E) When Bane Co. begins using the land productively.

2) Kenzie Co. acquired 70% of McCready Co. on January 1, 2021. During 2021, Kenzie made several sales of inventory to McCready. The cost and sales price of the goods were $150,000 and $220,000, respectively. McCready still owned one-fourth of the goods at the end of 2021. Consolidated cost of goods sold for 2021 was $2,280,000 due to a consolidating adjustment for intra-entity transfers less intra-entity gross profit in McCready’s ending inventory.How would consolidated cost of goods sold have differed if the inventory transfers had been for the same amount and cost, but from McCready to Kenzie?

A) Consolidated cost of goods sold would have remained $2,280,000.
B) Consolidated cost of goods sold would have been more than $2,280,000 because of the controlling interest in the subsidiary.
C) Consolidated cost of goods sold would have been less than $2,280,000 because of the noncontrolling interest in the subsidiary.
D) Consolidated cost of goods sold would have been more than $2,280,000 because of the noncontrolling interest in the subsidiary.
E) The effect on consolidated cost of goods sold cannot be predicted from the information provided.

3) Kenzie Co. acquired 70% of McCready Co. on January 1, 2021. During 2021, Kenzie made several sales of inventory to McCready. The cost and sales price of the goods were $150,000 and $220,000, respectively. McCready still owned one-fourth of the goods at the end of 2021. Consolidated cost of goods sold for 2021 was $2,280,000 due to a consolidating adjustment for intra-entity transfers less intra-entity gross profit in McCready’s ending inventory.How would net income attributable to the noncontrolling interest be different if the transfers had been for the same amount and cost, but from McCready to Kenzie?

A) Net income attributable to the noncontrolling interest would have decreased by $5,250.
B) Net income attributable to the noncontrolling interest would have increased by $17,500.
C) Net income attributable to the noncontrolling interest would have increased by $10,500.
D) Net income attributable to the noncontrolling interest would have decreased by $15,750.
E) Net income attributable to the noncontrolling interest would have decreased by $52,500.

4) On January 1, 2021, Doyle Corp. acquired 75% of the voting common stock of Bressant Inc. During the year, Doyle sold to Bressant for $510,000 goods that cost $380,000. At year-end, Bressant owned 20% of the goods transferred. Bressant reported net income of $215,000, and Doyle’s net income was $902,000. Doyle decided to use the equity method to account for this investment. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what was the net income attributable to the noncontrolling interest?

A) $27,750.
B) $43,000.
C) $47,250.
D) $53,750.
E) $60,250.

5) Poole Co. acquired 100% of Mullen Inc. on January 3, 2021. During 2021, Poole sold goods to Mullen for $2,500,000 that cost Poole $1,850,000. Mullen still owned 30% of the goods at the end of the year. Cost of goods sold was $11,200,000 for Poole and $6,600,000 for Mullen. What was consolidated cost of goods sold?

A) $15,105,000.
B) $15,300,000.
C) $15,495,000.
D) $17,800,000.
E) $17,995,000.

6) Colbert Inc. acquired 100% of Stewart Manufacturing on January 2, 2020. During 2020, Colbert sold Stewart $640,000 of goods, which had cost $450,000. Stewart still owned 18% of the goods at the end of the year. In 2021, Colbert sold goods with a cost of $820,000 to Stewart for $1,000,000, and Stewart still owned 15% of the goods at year-end. For 2021, the cost of goods sold totaled $5,800,000 for Colbert, and $1,300,000 for Stewart. What was consolidated cost of goods sold for 2021?

A) $6,038,800.
B) $6,092,800.
C) $6,100,000.
D) $6,107,200.
E) $7,100,000.

7) Prescott Inc. owned 80% of the voting common stock of Hutchins Corp. During 2021, Hutchins made several sales of inventory to Prescott. The total selling price was $190,000 and the cost was $105,000. At the end of the year, 30% of the goods were still in Prescott’s inventory. Hutchins’s reported net income was $320,000. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what was the net income attributable to the noncontrolling interest in Hutchins?

A) $47,000.
B) $58,900.
C) $64,000.
D) $69,100.
E) $90,900.

8) Macklin Co. owned 70% of Holland Corp. During 2021, Macklin sold to Holland land with a book value of $51,000. The selling price was $75,000. For purposes of the December 31, 2021 consolidated financial statements, at what amount should the land be reported?

A) $7,200.
B) $24,000.
C) $51,000.
D) $67,800.
E) $75,000.

9) Clark Corp. owned 75% of the voting common stock of Andrew Co. On January 3, 2020, Andrew sold a parcel of land to Clark. The land had a book value of $36,000 and was sold to Clark for $52,000. Andrew’s reported net income for 2020 was $123,000. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what is net income attributable to the noncontrolling interest?

A) $14,750.
B) $26,750.
C) $27,750.
D) $30,750.
E) $34,750.

10) Milton Co. owned all of the voting common stock of Walker Co. On January 3, 2020, Milton sold equipment to Walker for $140,000. The equipment cost Clemente $165,000. At the time of the transfer, the balance in accumulated depreciation was $45,000. The equipment had a remaining useful life of five years and a $0 salvage value. Both entities use the straight-line method of depreciation.At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31, 2020?

A) $96,000.
B) $120,000.
C) $140,000.
D) $144,000.
E) $165,000.

11) Milton Co. owned all of the voting common stock of Walker Co. On January 3, 2020, Milton sold equipment to Walker for $140,000. The equipment cost Clemente $165,000. At the time of the transfer, the balance in accumulated depreciation was $45,000. The equipment had a remaining useful life of five years and a $0 salvage value. Both entities use the straight-line method of depreciation.At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31, 2021?

A) $48,000.
B) $72,000.
C) $96,000.
D) $145,000.
E) $165,000.

12) During 2020, Odyssey Co. sold inventory to its wholly-owned subsidiary, Civic Co. The inventory cost $40,000 and was sold to Lord for $58,000. For consolidation reporting purposes, when is the $18,000 intra-entity gross profit recognized?

A) When goods are transferred to a third party by Civic.
B) When Civic pays Odyssey for the goods.
C) When Odyssey sold the goods to Civic.
D) When Civic receives the goods.
E) No gain can be recognized since the transfer was between related parties.

13) Will Co. owned 80% of the voting common stock of Carlton Co. During 2020, Carlton made frequent sales of inventory to Will. There was deferred intra-entity gross profit of $50,000 in the beginning inventory and $30,000 of intra-entity gross profit at the end of the year. Carlton reported net income of $173,000 for 2020. Will decided to use the equity method to account for the investment. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what is the net income attributable to the noncontrolling interest for 2020?

A) $28,600.
B) $30,600.
C) $34,600.
D) $38,600.
E) $50,600.

14) Beesly Co. owned all of the voting common stock of Halpert Corp. The corporations' balance sheets dated December 31, 2020, include the following balances for land: —Beesly – $461,000, and —Halpert – $265,000. On the original date of acquisition, the book value of Halpert’s land was equal to its fair value. On May 2, 2021, Beesly sold to Halpert a parcel of land with a book value of $75,000. The selling price was $88,000. There were no other transfers, which affected the companies' land accounts during 2020. What is the consolidated balance for land on the 2021 balance sheet?

A) $713,000.
B) $726,000.
C) $739,000.
D) $801,000.
E) $814,000.

15) Hudson Corp. owned a 85% interest in Martin Co. Martin frequently made sales of inventory to Hudson. The sales, which include a markup over cost of 25%, were $460,000 in 2020 and $520,000 in 2021. At the end of each year, Hudson still owned 40% of the goods. Net income for Martin was $932,000 during 2021. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what was the net income attributable to the noncontrolling interest for 2021?

A) $128,040.
B) $137,550.
C) $139,080.
D) $139,800.
E) $151,560.

16) On January 1, 2021, Kapoor Co. sold equipment to its subsidiary, Howard Corp., for $125,000. The equipment had cost $150,000, and the balance in accumulated depreciation was $70,000. The equipment had an estimated remaining useful life of eight years and no salvage value. Both companies use straight-line depreciation. On their separate 2021 income statements, Kapoor and Howard reported depreciation expense of $86,000 and $64,000, respectively. The amount of depreciation expense on the consolidated income statement for 2021 would have been:

A) $134,375.
B) $144,375.
C) $150,000.
D) $155,625.
E) $165,625.

17) Flax Co. acquired 80% percent of the voting common stock of Levinson Corp. on January 1, 2021. During the year, Flax made sales of inventory to Levinson. The inventory cost Flax $275,000 and was sold to Levinson for $420,000. Levinson held $84,000 of the goods in its inventory at the end of the year. The amount of intra-entity gross profit for which recognition is deferred, and should therefore be eliminated in the consolidation process at the end of 2021, is:

A) $23,200.
B) $29,000.
C) $67,200.
D) $116,000.
E) $145,000.

18) Malone Co. owned 70% of Bernard Corp.'s common stock. During November 2021, Bernard sold merchandise to Malone for $150,000. At December 31, 2021, 40% of this merchandise remained in Malone's inventory. For 2021, gross profit percentages were 25% of sales for Malone and 30% of sales for Bernard. The amount of intra-entity gross profit remaining in ending inventory at December 31, 2021 that should be eliminated in the consolidation process is:

A) $11,250.
B) $14,400.
C) $18,000.
D) $36,000.
E) $45,000.

19) Pot Co. holds 90% of the common stock of Skillet Co. During 2021, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000.Included in the amounts for Pot’s sales were Pot’s sales of merchandise to Skillet for $140,000. There were no intra-entity transfers from Skillet to Pot. Intra-entity transfers had the same markup as sales to outsiders. Skillet still held 40% of the intra-entity gross profit remaining in ending inventory at the end of 2021. What are consolidated sales and cost of goods sold, respectively for 2021?

A) $1,400,000 and $952,000.
B) $1,400,000 and $966,000.
C) $1,540,000 and $1,078,000.
D) $1,400,000 and $1,022,000.
E) $1,540,000 and $1,092,000.

20) Pot Co. holds 90% of the common stock of Skillet Co. During 2021, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000.Included in the amounts for Skillet’s sales were intra-entity gross profits related to Skillet’s intra-entity transfer of merchandise to Pot for $140,000. There were no intra-entity transfers from Pot to Skillet. Intra-entity transfers had the same markup as sales to outsiders. Pot still had 40% of the intra-entity gross profit remaining in ending inventory at the end of 2021. What are consolidated sales and cost of goods sold for 2021?

A) $1,400,000 and $952,000.
B) $1,400,000 and $966,000.
C) $1,540,000 and $1,078,000.
D) $1,400,000 and $974,400.
E) $1,540,000 and $1,092,000.

21) Pot Co. holds 90% of the common stock of Skillet Co. During 2021, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000.Included in the amounts for Pot’s sales were Pot’s sales for merchandise to Skillet for $140,000. There were no sales from Skillet to Pot. Intra-entity transfers had the same markup as sales to outsiders. Skillet had resold all of the intra-entity transfers (purchases) from Pot to outside parties during 2021. What are consolidated sales and cost of goods sold for 2021?

A) $1,400,000 and $952,000.
B) $1,400,000 and $1,092,000.
C) $1,540,000 and $952,000.
D) $1,400,000 and $1,232,000.
E) $1,540,000 and $1,092,000.

22) Palmer Corp. owned 80% of the outstanding common stock of Creed Inc. On January 1, 2019, Palmer acquired a building with a ten-year life for $450,000. No salvage value was anticipated and the building was to be depreciated on the straight-line basis. On January 1, 2021, Palmer sold this building to Creed for $412,000. At that time, the building had a remaining life of eight years but still no expected salvage value. For consolidation purposes, what is the Excess Depreciation (ED entry) for this building for 2021?

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

23) On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong’s stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired.As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows:

During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession.What is the total of consolidated revenues at December 31, 2021?

A) $700,000.
B) $644,000.
C) $588,000.
D) $560,000.
E) $840,000.

24) On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong’s stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired.As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows:

During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession.What is the total of consolidated operating expenses at December 31, 2021?

A) $42,000.
B) $47,600.
C) $53,200.
D) $49,000.
E) $35,000.

25) On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong’s stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired.As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows:

During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession.What is the total of consolidated cost of goods sold at December 31, 2021?

A) $196,000.
B) $212,800.
C) $184,800.
D) $203,000.
E) $168,000.

26) On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong’s stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired.As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows:

During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession.What is the consolidated total of noncontrolling interest at December 31, 2021?

A) $100,800.
B) $97,440.
C) $93,800.
D) $120,400.
E) $117,040.

27) On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong’s stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired.As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows:

During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession.What is the consolidated total for equipment (net) at December 31, 2021?

A) $952,000.
B) $1,058,400.
C) $1,069,600.
D) $1,064,000.
E) $1,066,800.

28) On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong’s stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired.As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows:

During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession.What is the consolidated total for inventory at December 31, 2021?

A) $336,000.
B) $280,000.
C) $364,000.
D) $347,200.
E) $349,300.

29) Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020.In the consolidation worksheet for 2020, which of the following accounts would be debited to eliminate the intra-entity transfer of inventory?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

30) Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020.In the consolidation worksheet for 2020, which of the following accounts would be credited to eliminate the intra-entity transfer of inventory?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

31) Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020.In the consolidation worksheet for 2020, which of the following accounts would be debited to eliminate unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

32) Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020.In the consolidation worksheet for 2020, which of the following accounts would be credited to defer unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

33) Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020.In the consolidation worksheet for 2021, assuming Carter uses the initial value method of accounting for its investment in Strickland, which of the following accounts would be debited to defer unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

34) Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020.In the consolidation worksheet for 2021, assuming Carter uses the initial value method of accounting for its investment in Strickland, which of the following accounts would be credited to defer recognition of intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.

35) Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2020. With respect to one-third of the inventory sold to Fisher, Walsh accounts for it using the equity method of accounting.In the consolidation worksheet for 2020, which of the following accounts would be debited to eliminate the intra-entity transfer of inventory?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.

36) Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2020. With respect to one-third of the inventory sold to Fisher, Walsh accounts for it using the equity method of accounting.In the consolidation worksheet for 2020, which of the following accounts would be credited to eliminate the intra-entity transfer of inventory?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.

37) Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2020. With respect to one-third of the inventory sold to Fisher, Walsh accounts for it using the equity method of accounting.In the consolidation worksheet for 2020, which of the following accounts would be debited to eliminate unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.

38) Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2020. With respect to one-third of the inventory sold to Fisher, Walsh accounts for it using the equity method of accounting.In the consolidation worksheet for 2020, which of the following accounts would be credited to eliminate unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.

39) Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2020. With respect to one-third of the inventory sold to Fisher, Walsh accounts for it using the equity method of accounting.In the consolidation worksheet for 2021, which of the following accounts would be debited to eliminate unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.

40) Walsh Company sells inventory to its subsidiary, Fisher Company, at a profit during 2020. With respect to one-third of the inventory sold to Fisher, Walsh accounts for it using the equity method of accounting.In the consolidation worksheet for 2021, which of the following accounts would be credited to eliminate unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.

41) Which of the following statements is true regarding an intra-entity transfer of land?

A) A loss is always recognized but a gain is deferred in a consolidated income statement.
B) A loss and a gain are deferred until the land is sold to an outside party.
C) A loss and a gain are always recognized in a consolidated income statement.
D) A gain is always recognized but a loss is deferred in a consolidated income statement.
E) Recognition of a gain or loss is deferred by adjusting stockholders' equity through comprehensive income.

42) Parent sold land to its subsidiary resulting in a gain in 2019, the year of transfer. The subsidiary sold the land to an unrelated third party for a gain in 2022. Which of the following statements is true?

A) A gain will be recognized in the consolidated income statement in 2019.
B) A gain will be recognized in the consolidated income statement in 2022.
C) No gain will be recognized in the 2022 consolidated income statement.
D) Only the parent company will recognize a gain in 2022.
E) The subsidiary will recognize a gain in 2019.

43) An intra-entity transfer of a depreciable asset took place whereby the transfer price exceeded the book value of the asset. Which statement is true with respect to the year following the year in which the transfer occurred?

A) A worksheet entry is made with a debit to gain for a downstream transfer.
B) A worksheet entry is made with a debit to gain for an upstream transfer.
C) A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer when the parent uses the equity method.
D) A worksheet entry is made with a debit to retained earnings for a downstream transfer, regardless of the method used account for the investment.
E) No worksheet entry is necessary.

44) An intra-entity transfer took place whereby the book value exceeded the transfer price of a depreciable asset. Which statement is true for the year after the year of transfer?

A) A worksheet entry is made with a debit to retained earnings for an upstream transfer.
B) A worksheet entry is made with a credit to retained earnings for an upstream transfer.
C) A worksheet entry is made with a debit to retained earnings for a downstream transfer.
D) A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer.
E) No worksheet entry is necessary.

45) An intra-entity transfer took place whereby the transfer price was less than the book value of a depreciable asset. Which statement is true for the year subsequent to the year of transfer?

A) A worksheet entry is made with a debit to investment in subsidiary for an upstream transfer.
B) A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer.
C) A worksheet entry is made with a credit to investment in subsidiary for a downstream transfer when the parent uses the equity method.
D) A worksheet entry is made with a debit to retained earnings for an upstream transfer, regardless of the method used to account for the investment.
E) No worksheet entry is necessary.

46) Which of the following statements is true concerning an intra-entity transfer of a depreciable asset?

A) Net income attributable to the noncontrolling interest is never affected by a gain on the transfer.
B) Net income attributable to the noncontrolling interest is always affected by a gain on the transfer.
C) Net income attributable to the noncontrolling interest is affected by a downstream gain only.
D) Net income attributable to the noncontrolling interest is affected only when the transfer is upstream.
E) Net income attributable to the noncontrolling interest is increased by an upstream gain in the year of transfer.

47) Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020.

Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends.

Compute the equity in earnings of Anderson reported on Philbin’s books for 2020.

A) $63,000.
B) $62,730.
C) $63,270.
D) $70,000.
E) $62,700.

48) Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020.

Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends.

Compute the equity in earnings of Anderson reported on Philbin’s books for 2021.

A) $76,500.
B) $77,130.
C) $75,870.
D) $75,600.
E) $75,800.

49) Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020.

Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends.

Compute the equity in earnings of Anderson reported on Philbin’s books for 2022.

A) $84,600.
B) $84,375.
C) $83,925.
D) $84,825.
E) $84,850.

50) Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020.

Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends.

Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Anderson for 2020.

A) $6,970.
B) $7,000.
C) $7,030.
D) $6,270.
E) $6,230.

51) Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020.

Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends.

Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Anderson for 2021.

A) $8,500.
B) $8,570.
C) $8,430.
D) $8,400.
E) $7,580.

52) Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020.

Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends.

Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Anderson for 2022.

A) $9,400.
B) $9,375.
C) $9,425.
D) $9,325.
E) $8,485.

53) Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020.

Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends.

For consolidation purposes, what amount would be debited to cost of goods sold for the 2020 consolidation worksheet with regard to unrecognized intra-entity gross profit remaining in ending inventory with respect to the transfer of merchandise?

A) $300.
B) $240.
C) $2,000.
D) $1,600.
E) $270.

54) Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020.

Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends.

For consolidation purposes, what amount would be debited to cost of goods sold for the 2021 consolidation worksheet with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2021 transfer of merchandise?

A) $1,000.
B) $800.
C) $3,000.
D) $2,400.
E) $900.

55) Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020.

Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends.

For consolidation purposes, what amount would be debited to cost of goods sold for the 2022 consolidation worksheet with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2022 intra-entity transfer of merchandise?

A) $600.
B) $750.
C) $3,760.
D) $3,000.
E) $675.

56) Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020.

Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends.

For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2020 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2020 intra-entity transfer of merchandise?

A) $0.
B) $1,600.
C) $300.
D) $240.
E) $270.

57) Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020.

Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends.

For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2021 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2020 intra-entity transfer of merchandise?

A) $240
B) $300.
C) $2,000.
D) $1,600.
E) $270.

58) Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin’s intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020.

Assume the equity method is used. The following data are available pertaining to Anderson’s income and dividends.

For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2022 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2021 intra-entity transfer of merchandise?

A) $3,000.
B) $2,400.
C) $1,000.
D) $800.
E) $900.

59) Patti Company owns 80% of the common stock of Shannon, Inc. In the current year, Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000. For the same period, Shannon has sales of $200,000 and cost of goods sold of $160,000. During the year, Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup. At the end of the year, Shannon still possesses 30 percent of this inventory.Compute consolidated sales.

A) $10,000,000.
B) $10,126,000.
C) $10,140,000.
D) $10,200,000.
E) $10,260,000.

60) Patti Company owns 80% of the common stock of Shannon, Inc. In the current year, Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000. For the same period, Shannon has sales of $200,000 and cost of goods sold of $160,000. During the year, Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup. At the end of the year, Shannon still possesses 30 percent of this inventory.Compute consolidated cost of goods sold.

A) $7,500,000.
B) $7,600,000.
C) $7,615,000.
D) $7,604,500.
E) $7,660,000.

61) Patti Company owns 80% of the common stock of Shannon, Inc. In the current year, Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000. For the same period, Shannon has sales of $200,000 and cost of goods sold of $160,000. During the year, Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup. At the end of the year, Shannon still possesses 30 percent of this inventory.Assume the same information, except Shannon sold inventory to Patti. Compute consolidated sales.

A) $10,000,000.
B) $10,126,000.
C) $10,140,000.
D) $10,200,000.
E) $10,260,000.

62) Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2020. On January 1, 2020, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.On April 1, 2020 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends declared:

What amount should be recorded on Wilson’s books in 2020 as gain on the transfer of equipment, prior to preparing consolidating entries?

A) $19,500.
B) $18,250.
C) $11,750.
D) $38,250.
E) $37,500.

63) Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2020. On January 1, 2020, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.On April 1, 2020 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends declared:

Compute the amortization of gain through a depreciation adjustment for 2020 for consolidation purposes.

A) $1,950.
B) $1,825.
C) $1,500.
D) $2,000.
E) $5,250.

64) Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2020. On January 1, 2020, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.On April 1, 2020 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends declared:

Compute the amortization of gain through a depreciation adjustment for 2021 for consolidation purposes.

A) $1,950.
B) $1,825.
C) $2,000.
D) $1,500.
E) $7,000.

65) Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2020. On January 1, 2020, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.On April 1, 2020 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends declared:

Compute the amortization of gain through a depreciation adjustment for 2022 for consolidation purposes.

A) $1,925.
B) $1,825.
C) $2,000.
D) $1,500.
E) $7,000.

66) Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2020. On January 1, 2020, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.On April 1, 2020 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends declared:

Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute Wilson’s share of income from Simon for consolidation for 2020.

A) $72,000.
B) $90,000.
C) $73,575.
D) $73,800.
E) $72,500.

67) Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2020. On January 1, 2020, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.On April 1, 2020 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends declared:

Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute Wilson’s share of income from Simon for consolidation for 2021.

A) $108,000.
B) $110,000.
C) $106,000.
D) $109,825.
E) $109,800.

68) Wilson owned equipment with an estimated life of 10 years when the equipment was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2020. On January 1, 2020, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years.On April 1, 2020 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends declared:

Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute Wilson’s share of income from Simon for consolidation for 2022.

A) $118,825.
B) $115,000.
C) $117,000.
D) $119,000.
E) $118,800.

69) On January 1, 2020, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder’s records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2020 and 2021, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.What amount of gain should be reported by Smeder Company relating to the equipment for 2020 prior to making consolidating entries?

A) $36,000.
B) $34,000.
C) $12,000.
D) $10,000.
E) $0.

70) On January 1, 2020, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder’s records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2020 and 2021, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what amount of this gain should be recognized for consolidation purposes for 2020?

A) $12,000.
B) $9,600.
C) $8,400.
D) $2,000.
E) $1,200.

71) On January 1, 2020, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder’s records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2020 and 2021, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.For consolidation purposes, what net debit or credit will be made for the year 2020 relating to the accumulated depreciation for the equipment transfer?

A) Debit accumulated depreciation, $46,000.
B) Debit accumulated depreciation, $48,000.
C) Credit accumulated depreciation, $48,000.
D) Credit accumulated depreciation, $46,000.
E) Debit accumulated depreciation, $2,000.

72) On January 1, 2020, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder’s records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2020 and 2021, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.What is the net effect on net income as a result of consolidating adjustments made in 2020 with respect to the equipment transfer?

A) Increase net income by $2,000.
B) Decrease net income by $12,000.
C) Decrease net income by $10,000.
D) Decrease net income by $14,000.
E) Increase net income by $10,000.

73) Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2020, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2020 and 2021, respectively. Leo uses the equity method to account for its investment.Compute the gain or loss on the intra-entity transfer of land that should be reported on the books of Leo prior to consolidation.

A) $15,000 loss.
B) $15,000 gain.
C) $50,000 loss.
D) $50,000 gain.
E) $65,000 gain.

74) Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2020, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2020 and 2021, respectively. Leo uses the equity method to account for its investment.On a consolidation worksheet, what adjustment would be made for 2020 regarding the land transfer?

A) Debit gain for $50,000.
B) Credit gain for $50,000.
C) Debit land for $15,000.
D) Credit land for $15,000.
E) Credit gain for $15,000.

75) Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2020, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2020 and 2021, respectively. Leo uses the equity method to account for its investment.On a consolidation worksheet, having used the equity method, what adjustment would be made for 2021 regarding the land transfer?

A) Debit retained earnings for $15,000.
B) Credit retained earnings for $15,000.
C) Debit retained earnings for $50,000.
D) Credit retained earnings for $50,000.
E) Debit investment in Stiller for $15,000.

76) Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2020, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2020 and 2021, respectively. Leo uses the equity method to account for its investment.Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stiller on Leo's books for 2020.

A) $110,000.
B) $100,000.
C) $125,000.
D) $85,000.
E) $88,000.

77) Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2020, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2020 and 2021, respectively. Leo uses the equity method to account for its investment.Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stiller on Leo's books for 2021.

A) $140,000.
B) $97,000.
C) $125,000.
D) $100,000.
E) $112,000.

78) Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting.Compute the gain or loss reported on Stark’s books prior to consolidation from the intra-entity transfer of land in 2020.

A) $80,000 gain.
B) $80,000 loss.
C) $5,000 gain.
D) $5,000 loss.
E) $85,000 loss.

79) Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting.Which of the following will be included in a consolidation entry for 2020?

A) Debit Loss on Sale of Land for $5,000.
B) Credit Loss on Sale of Land for $5,000.
C) Debit Land for $5,000.
D) Debit Retained Earnings for $5,000.
E) Credit Gain on Sale of Land for $5,000.

80) Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting.Which of the following will be included in a consolidation entry for 2021?

A) Debit Retained Earnings for $5,000.
B) Credit Retained Earnings for $5,000.
C) Debit Investment in Subsidiary for $5,000.
D) Credit Investment in Subsidiary for $5,000.
E) Credit Land for $5,000.

81) Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting.Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stark reported on Parker's books for 2020.

A) $205,000.
B) $200,000.
C) $180,000.
D) $175,500.
E) $184,500.

82) Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting.Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stark reported on Parker's books for 2021.

A) $185,000.
B) $157,500.
C) $166,500.
D) $162,000.
E) $180,000.

83) Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting.Compute Parker's reported gain or loss on its internal accounting records prior to consolidation relating to the land for 2022.

A) $12,000 gain.
B) $5,000 loss.
C) $12,000 loss.
D) $7,000 gain.
E) $7,000 loss.

84) Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting.Compute Stark's reported gain or loss relating to the land for 2022.

A) $5,000 loss.
B) $5,000 gain.
C) $7,000 loss.
D) $7,000 gain.
E) $ 0.

85) Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting.Compute the gain or loss relating to the land that will be reported in consolidated net income for 2022.

A) $5,000 loss.
B) $7,000 gain.
C) $12,000 gain.
D) $7,000 loss.
E) $12,000 loss.

86) Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting.Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stark reported on Parker's books for 2022.

A) $204,300.
B) $202,500.
C) $193,500.
D) $191,700.
E) $198,000.

87) Pepe, Incorporated acquired 60% of Devin Company on January 1, 2020. On that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years. Devin reported net income of $300,000 and $325,000 for 2020 and 2021, respectively. Pepe uses the equity method to account for its investment in Devin.What is the gain or loss on equipment recognized by Devin on its internal accounting records for 2020?

A) $54,000 gain.
B) $21,000 loss.
C) $21,000 gain.
D) $9,000 loss.
E) $9,000 gain.

88) Pepe, Incorporated acquired 60% of Devin Company on January 1, 2020. On that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years. Devin reported net income of $300,000 and $325,000 for 2020 and 2021, respectively. Pepe uses the equity method to account for its investment in Devin.What is the consolidated gain or loss on equipment for 2020?

A) $0.
B) $9,000 gain.
C) $9,000 loss.
D) $21,000 gain.
E) $21,000 loss.

89) Pepe, Incorporated acquired 60% of Devin Company on January 1, 2020. On that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years. Devin reported net income of $300,000 and $325,000 for 2020 and 2021, respectively. Pepe uses the equity method to account for its investment in Devin.Assuming there are no excess amortizations or other intra-entity transactions, Compute the income from Devin reported on Pepe's books for 2020.

A) $174,600.
B) $184,800.
C) $172,000.
D) $171,000.
E) $180,000.

90) Pepe, Incorporated acquired 60% of Devin Company on January 1, 2020. On that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years. Devin reported net income of $300,000 and $325,000 for 2020 and 2021, respectively. Pepe uses the equity method to account for its investment in Devin.Assuming there are no excess amortizations or other intra-entity transactions, Compute the income from Devin reported on Pepe's books for 2021.

A) $190,200.
B) $196,000.
C) $194,400.
D) $187,000.
E) $195,000.

91) Pepe, Incorporated acquired 60% of Devin Company on January 1, 2020. On that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years. Devin reported net income of $300,000 and $325,000 for 2020 and 2021, respectively. Pepe uses the equity method to account for its investment in Devin.Assuming there are no excess amortizations or other intra-entity transactions, Compute the net income attributable to the noncontrolling interest of Devin for 2020.

A) $116,400.
B) $120,400.
C) $120,000.
D) $123,200.
E) $112,000.

92) Pepe, Incorporated acquired 60% of Devin Company on January 1, 2020. On that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years. Devin reported net income of $300,000 and $325,000 for 2020 and 2021, respectively. Pepe uses the equity method to account for its investment in Devin.Assuming there are no excess amortizations or other intra-entity transactions, compute the net income attributable to the noncontrolling interest of Devin for 2021.

A) $126,800.
B) $130,000.
C) $122,000.
D) $130,800.
E) $129,600.

93) On January 1, 2021, Daniel Corp. acquired 80% of the voting common stock of Phillips Inc. During the year, Daniel sold to Phillips for $315,000 goods that cost $210,000. At year-end, Phillips owned 30% of the goods transferred. Phillips reported net income of $305,000, and Daniel’s net income was $986,000. Daniel decided to use the equity method to account for this investment. What amount of intra-entity gross profit would be deferred in 2021?

A) $21,000.
B) $25,200.
C) $31,500.
D) $84,000.
E) $105,000.

94) Brooks Co. acquired 90% of Hill Inc. on January 3, 2021. During 2021, Brooks sold goods to Hill for $2,500,000 that cost Brooks $1,850,000. Hill still owned 30% of the goods at the end of the year. Cost of goods sold was $11,200,000 for Brooks and $6,600,000 for Hill. What amount of intra-entity gross profit should be deferred in 2021?

A) $0.
B) $65,000.
C) $175,500.
D) $195,000.
E) $585,000.

95) Charleston Inc. acquired 75% of Savannah Manufacturing on January 4, 2020. During 2020, Charleston sold Savannah $460,000 of goods, which had cost $380,000. Savannah still owned 20% of the goods at the end of the year. In 2021, Charleston sold goods with a cost of $520,000 to Savannah for $700,000, and Savannah still owned 15% of the goods at year-end. What amount of intra-entity gross profit should be deferred in 2021?

A) $27,000.
B) $20,250.
C) $16,000.
D) $12,000.
E) $0.

96) Charleston Inc. acquired 75% of Savannah Manufacturing on January 4, 2020. During 2020, Charleston sold Savannah $460,000 of goods, which had cost $380,000. Savannah still owned 20% of the goods at the end of the year. In 2021, Charleston sold goods with a cost of $520,000 to Savannah for $700,000, and Savannah still owned 15% of the goods at year-end. What amount of intra-entity gross profit should be recognized through the consolidation process in 2021?

A) $27,000.
B) $20,250.
C) $16,000.
D) $12,000.
E) $0.

97) Prater Inc. owned 85% of the voting common stock of Harkin Corp. During 2021, Harkin made several sales of inventory to Prater. The total selling price was $215,000 and the cost was $105,000. At the end of the year, 40% of the goods were still in Prater’s inventory. Harkin’s reported net income was $400,000. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what was the net income attributable to the noncontrolling interest in Harkin?

A) $51,000.
B) $53,400.
C) $60,000.
D) $66,600.
E) $32,250.

98) Prater Inc. owned 85% of the voting common stock of Harkin Corp. During 2021, Prater made several sales of inventory to Harkin. The total selling price was $215,000 and the cost was $105,000. At the end of the year, 40% of the goods were still in Harkin’s inventory. Harkin’s reported net income was $400,000. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what was the net income attributable to the noncontrolling interest in Harkin?

A) $51,000.
B) $53,400.
C) $60,000.
D) $66,600.
E) $32,250.

SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
99) Tara Company owns 70 percent of the common stock of Stodd Inc. In the current year, Tara reports sales of $5,000,000 and cost of goods sold of $3,500,000. For the same period, Stodd has sales of $500,000 and cost of goods sold of $400,000. During the year, Stodd sold merchandise to Tara for $40,000 at a price based on the normal markup. At the end of the year, Tara still possesses 40 percent of this inventory. Prepare the consolidation entry to defer intra-entity gross profit.

100) King Corp. owns 85% of James Co. King uses the equity method to account for its investments. During 2021, King sells inventory to James for $500,000. The inventory originally cost King $420,000. At December 31, 2021, 25% of the goods were still in James' inventory.Required:Prepare the Consolidation Entry TI and Consolidation Entry G for the consolidation worksheet.

101) Flintstone Inc. acquired all of Rubble Co. on January 1, 2021. Flintstone decided to use the initial value method to account for this investment. During 2021, Flintstone sold to Rubble for $600,000 inventory with a cost of $500,000. At the end of the year 30% of the goods were still in Rubble's inventory.Required:Prepare Consolidation Entry TI for the intra-entity transfer and Consolidation Entry G for the ending inventory adjustment necessary for the consolidation worksheet at December 31, 2021.

102) Yoderly Co., a wholly owned subsidiary of Nelson Corp., sold goods to Nelson near the end of 2021. The goods had cost Yoderly $105,000 and the selling price was $140,000. Nelson had not sold any of the goods by the end of the year.Required:Prepare Consolidation Entry TI and Consolidation Entry G that are required for 2021.

103) Strayten Corp. is a wholly owned subsidiary of Quint Inc. Quint decided to use the initial value method to account for this investment. During 2021, Strayten sold Quint goods, which had cost $48,000. The selling price was $64,000. Quint still had one-eighth of the goods purchased from Strayten on hand at the end of 2021.Required:Prepare Consolidation Entry *G, which would have to be recorded at the end of 2022.

104) Hambly Corp. owned 80% of the voting common stock of Stroban Co. During 2021, Stroban sold a parcel of land to Hambly. The land had a book value of $82,000 and was sold to Hambly for $145,000. Stroban's reported net income for 2021 was $119,000.Required:Assuming there are no other intra-entity transactions nor excess amortizations, what was the net income attributable to the noncontrolling interest of Stroban?

105) McGraw Corp. owned all of the voting common stock of both Ritter Co. and Lawler Co. During 2021, Ritter sold inventory to Lawler. The goods had cost Ritter $65,000, and they were sold to Lawler for $100,000. At the end of 2021, Lawler still held 30% of the inventory.Required:How should the sale between Lawler and Ritter be accounted for in a 2021 consolidation worksheet? Show worksheet entries to support your answer.

106) Virginia Corp. owned all of the voting common stock of Stateside Co. Both companies use the perpetual inventory method, and Virginia decided to use the partial equity method to account for this investment. During 2020, Virginia made cash sales of $400,000 to Stateside. The gross profit rate was 30% of the selling price. By the end of 2020, Stateside had sold 75% of the goods to outside parties for $420,000 cash.Prepare journal entries for Virginia and Stateside to record the sales/purchases during 2020.

107) Virginia Corp. owned all of the voting common stock of Stateside Co. Both companies use the perpetual inventory method, and Virginia decided to use the partial equity method to account for this investment. During 2020, Virginia made cash sales of $400,000 to Stateside. The gross profit rate was 30% of the selling price. By the end of 2020, Stateside had sold 75% of the goods to outside parties for $420,000 cash.Prepare the consolidation entries that should be made at the end of 2020.

108) Virginia Corp. owned all of the voting common stock of Stateside Co. Both companies use the perpetual inventory method, and Virginia decided to use the partial equity method to account for this investment. During 2020, Virginia made cash sales of $400,000 to Stateside. The gross profit rate was 30% of the selling price. By the end of 2020, Stateside had sold 75% of the goods to outside parties for $420,000 cash.Prepare any 2021 consolidation worksheet entries that would be required regarding the 2020 inventory transfer.

109) 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, 2021:

Assume that Polar sold inventory to Icecap at a markup equal to 25% of cost. Intra-entity transfers were $130,000 in 2020 and $165,000 in 2021. Of this inventory, $39,000 of the 2020 transfers were retained and then sold by Icecap in 2021, while $55,000 of the 2021 transfers were held until 2022.Required:For the consolidated financial statements for 2021, determine the balances that would appear for the following accounts: (i) Cost of Goods Sold; (ii) Inventory; and (iii) Net income attributable to the noncontrolling interest.

110) 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, 2021:

Assume that Icecap sold inventory to Polar at a markup equal to 25% of cost. Intra-entity transfers were $70,000 in 2020 and $112,000 in 2021. Of this inventory, $29,000 of the 2020 transfers were retained and then sold by Polar in 2021, whereas $49,000 of the 2021 transfers were held until 2022.Required:For the consolidated financial statements for 2021, determine the balances that would appear for the following accounts: (i) Cost of Goods Sold; (ii) Inventory; and (iii) Net income attributable to the noncontrolling interest.

111) 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, 2021:

Polar sold a building to Icecap on January 1, 2020 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 2021, determine the balances that would appear for the following accounts: (i) Buildings (net); (ii) Operating expenses; and (iii) Net income attributable to the noncontrolling interest.

112) On January 1, 2021, Musical Corp. sold equipment to Martin Inc. (a wholly-owned subsidiary) for $168,000 in cash. The equipment originally cost $140,000 but had a book value of only $98,000 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense was calculated using the straight-line method.Musical earned $308,000 in net income in 2021 (not including any investment income) while Martin reported $126,000. Assume there is no amortization related to the original investment.What is consolidated net income for 2021?

113) On January 1, 2021, Musical Corp. sold equipment to Martin Inc. (a wholly-owned subsidiary) for $168,000 in cash. The equipment originally cost $140,000 but had a book value of only $98,000 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense was calculated using the straight-line method.Musical earned $308,000 in net income in 2021 (not including any investment income) while Martin reported $126,000. Assume there is no amortization related to the original investment.Prepare a schedule of consolidated net income and the share to controlling and noncontrolling interests for 2021, assuming that Musical owned only 90% of Martin and the equipment transfer had been downstream.

114) On January 1, 2021, Musical Corp. sold equipment to Martin Inc. (a wholly-owned subsidiary) for $168,000 in cash. The equipment originally cost $140,000 but had a book value of only $98,000 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense was calculated using the straight-line method.Musical earned $308,000 in net income in 2021 (not including any investment income) while Martin reported $126,000. Assume there is no amortization related to the original investment.Prepare a schedule of consolidated net income and the share to controlling and noncontrolling interests for 2021, assuming that Musical owned only 90% of Martin and the equipment transfer had been upstream

ESSAY. Write your answer in the space provided or on a separate sheet of paper.
115) For each of the following situations (1-10), select the correct entry (A - E) that would be required on a consolidation worksheet.(A) Debit Retained Earnings.(B) Credit Retained Earnings.(C) Debit Investment in Subsidiary.(D) Credit Investment in Subsidiary.(E) None of these answer choices are correct.Upstream beginning intra-entity gross profit on inventory, using the initial value method of accounting.Downstream beginning intra-entity gross profit on inventory, using the initial value method of accounting.Upstream ending intra-entity gross profit on inventory, using the initial value method of accounting.Downstream ending intra-entity gross profit on inventory, using the initial value method of accounting.Upstream transfer of depreciable assets, in the period after transfer, where subsidiary recognizes a gain, using the initial value method of accounting.Downstream transfer of depreciable assets, in the period after transfer, where parent recognizes a gain, using the initial value method of accounting.Upstream transfer of land, in the period after transfer, where subsidiary recognizes a loss, using the initial value method of accounting.Downstream transfer of land, in the period after transfer, where parent recognizes a loss, using the initial value method of accounting.Eliminate income from subsidiary, recorded under the equity method of accounting.Eliminate recorded amortization of acquisition-date fair value over book value, recorded under the equity method of accounting.

116) On April 7, 2021, Martinez Corp. sold land to Hannon Co., its subsidiary. From a consolidated financial statement point of view, when will the gain on this transfer actually be recognized?

117) Throughout 2021, Flenderson Co. sold inventory to Bertram Co., its subsidiary. From a consolidated financial statement point of view, when will the gross profit on this transfer be recognized?

118) Lewis Corp. acquired all of the voting common stock of Vance Co. on January 1, 2021. Lewis owned land with a book value of $84,000 that was sold to Vance for its fair value of $120,000. How should this transfer be accounted for by the consolidated entity?

119) During 2021, Miner Co. sold inventory to its parent company, Bennett Corp. Bennett still owned the entire amount of inventory purchased at the end of 2021. Why must the gross profit on the sale be deferred when consolidated financial statements are prepared at the end of 2021?

120) How does a gain on an intra-entity transfer of equipment affect the calculation of a noncontrolling interest?

121) How do upstream and downstream inventory transfers differ in their effect in a year-end consolidation?

122) How is the gain on an intra-entity transfer of a depreciable asset recognized?

123) Vickers Inc. acquired all of the common stock of Scott Corp. on January 1, 2021. During 2021, Scott sold land to Vickers at a gain. No consolidation entry for the sale of the land was made at the end of 2021. What errors will this omission cause in the consolidated financial statements?

124) Why do intra-entity transfers between the component companies of a business combination occur so frequently?

125) Miller, Inc. owns 90 percent of Green, Inc. and bought $200,000 of Green’s inventory in 2021. The transfer profit was equal to 30 percent of the sales price. When preparing consolidated financial statements, what amount of these sales is eliminated?

126) What is an intra-entity gross profit on a transfer of inventory, and how is it treated on a consolidation worksheet?

127) What is the impact on the noncontrolling interest of a subsidiary when there are downstream transfers of inventory between the parent and subsidiary companies?

128) When is the gain on an intra-entity transfer of land recognized in consolidated net income?

129) What is the purpose of the adjustments to depreciation expense within the consolidation process when there has been an intra-entity transfer of a depreciable asset?