ProForm acquired 70 percent of ClipRite on June 30, 2017, for $770,000 in cash. Based on ClipRite's acquisition-date fair value, an unrecorded intangible of $450,000 was recognized and is being amortized at the rate of $12,000 per year. No goodwill was recognized in the acquisition. The noncontrolling interest fair value was assessed at $330,000 at the acquisition date. The 2018 financial statements are as follows: ProForm ClipRite
Sales $(820,000) $(640,000)
Cost of goods sold 545,000 410,000
Operating expenses 120,000 110,000
Dividend income (49,000) 0
Net income $ (204,000) $ (120,000)
Retained earnings, 1/1/18 $(1,100,000) $(870,000)
Net income (204,000) (120,000)
Dividends declared 120,000 70,000
Retained earnings, 12/31/18 $(1,184,000) $(920,000)
Cash and receivables $420,000 $320,000
Inventory 310,000 720,000
Investment in ClipRite 770,000 0
Fixed assets 1,200,000 700,000
Accumulated depreciation (400,000) (300,000)
Totals $ 2,300,000 $ 1,440,000
Liabilities $ (816,000) $ (220,000)
Common stock (300,000) (300,000)
Retained earnings, 12/31/18(1,184,000) (920,000)
Totals $(2,300,000) $(1,440,000)
ProForm sold ClipRite inventory costing $71,000 during the last six months of 2017 for $110,000. At year-end, 30 percent remained. ProForm sells ClipRite inventory costing $210,000 during 2018 for $270,000. At year-end, 10 percent is left.
Determine the consolidated balances for the following accounts:
Consolidated Balance
Sales
Cost of goods sold
Operating expenses
Dividend income
Net income attributable to noncontrolling interest
Inventory
Noncontrolling interest in subsidiary, 12/31/18

Answer and Explanation:

The computation is shown below:

The amount of consolidated sales balance is  

Proform Sales820,000

Cliprite Sales640,000

Less: Intra-entity Sales-270,000

Consolidated Sales Balance$1,190,000

The amount of consolidated cost of goods sold balance is

Proform's Cost of Goods Sold Book Value545,000

Cliprite's Cost of Goods Sold Book Value410,000

Less: Intra-Entity Transfers-270,000

Adjusted Gross Profit Deferred in 2017 [(110,000 - 71,000) × 30%]-11,700

Deferral of 2018 Intra-Entity Gross Profit [(270,000 - 210,000) × 10%]6,000

Consolidated Cost of Goods Sold Balance$679,300

The amount of consolidated operating expenses balance is  

Proform's Operating Expenses Book Value120,000

Cliprite's Operating Expenses Book Value110,000

Amortization of Intangible Assets12,000

Consolidated Operating Expenses Balance$242,000

The amount of consolidated dividends balance is $0 as there is an elimination in consolidation.

The amount of net income attributed is  

Cliprite's Reported Income for 2018120,000

Less: Amortization of Intangible Assets-12,000

Cliprite's Adjusted Net Income108,000

Net Income Attributable to Non Controlling Interest (108,000 × 30%)$32,400

The amount of consolidated inventory balance is  

Proform's Operating Expenses Book Value310,000

Cliprite's Operating Expenses Book Value720,000

Intra-Entity Gross Profit [(270,000 - 210,000) ×  10%]-6,000

Consolidated Inventory Balance$1,024,000

The value of noncontrolling interest in subsidiary is  

30% of Opening Book Value [(870,000 + 300,000) × 30%)351,000

Excess January 1 Intangible Allocation [(450,000 - 12,000 ÷ 2) × 30%)]133,200

Net Income Attributable to Noncontrolling Interest32,400

Dividends (70,000 ×  30%)-21,000

Non Controlling Interest, 12/31/18$495,600