On December 31, 2008, Defoe Corporation acquired 80 percent of Crusoe Company's common stock for $104,000 cash.

The fair value of the noncontrolling interest at that date was

determined to be $26,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: On that date, the book values of Crusoe's assets
and liabilities approximated fair value except for inventory, which had a fair value of $45,000, and buildings and equipment, which had a fair value of $100,000. At December 31, 2008, Defoe
reported accounts payable of $15,000 to Crusoe, which reported an equal amount in its accounts receivable.

The excess of the $387,500 total fair value of

the consideration given and the noncontrolling
interest on the date of combination over the
$300,000 book value of Special Foods is
$87,500. Of this total $87,500 differential,
$75,000 relates to the excess of the acquisition-
date fair value over the book value of Special
Foods net identifiable assets, as can be seen
from Figure 52. The remaining $12,500 of the
differential, the excess of the consideration
given and the noncontrolling interest over the
fair value of Special Foods net identifiable
assets, is assigned to goodwill.

Special Foods undervalued inventory, comprising $5,000

of the total differential was sold during the year.
Therefore, Peerless $4,000 portion ($5,000 80%) must
be written off by taking it out of the investment account
and reducing the parents income from the subsidiary.
Also, Peerless $48,000 portion of the excess fair value of
Special Foods buildings and equipment must be
amortized at $4,800 per year ($48,000 10) over the
remaining 10-year life. Finally, Peerless portion of the
goodwill impairment is included in this adjustment.
 Actual Amt Adj Needed
Upstream Inv Sale $ 1,000,000.00
COGS by Sub $ 700,000.00
20X2 Inventory $ 250,000.00 $ 175,000.00 $ (75,000.00) *Cannot overstate inv by recording P's
20X2 Sales $ (1,000,000.00) *Remove all of Subs interco sales
20X2 COGS $ 1,450,000.00 $ 525,000.00 $ (925,000.00) *Sub had recorded entire amount
and patent had recorded 1/4
Elimation Entry: Debit Credit
Sales $ 1,000,000.00
COGS $ 9,250,000.00
Inv $ 75,000.00

Consolidated Net Income

Platt e Company Income 1750000
River Co. Net Income 1100000
Less Unrealized Profit -75000
River Co realized NI 1025000
Consolidated Net Income 2775000
Income to NCI 205000
Income to Controlling Interest 2570000 2. On
January 1, 2002, Platte Company purchased 80 percent of the common stock of River Company. During 2002, River sold inventory to Platte for $1,000,000. The cost
of the inventory to River was $700,000. By the end of 2002, one-quarter of the inventory had not been resold by Platte; that inventory was resold to unrelated
parties during 2003. Both companies use perpetual inventory systems.

The results of operations for the year 2002 for the two companies are as follows: (a.) Give the entry needed in a three-part consolidation workpaper prepared at the end of 2002 to
eliminate the effects of the intercompany inventory transfer.
2002 operating income for Platte $1,750,000
(b.) Compute 2002 consolidated net income.
2002 net income for River 1,100,000
(c.) Compute the amount of income assigned to the noncontrolling and controlling
Total $2,850,000
interest in 2002.

ABC Corporation owns 75 percent of XYZ Company's voting shares. During 2008, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to XYZ for
$90 each. XYZ sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 2008, and sold the remainder in early 2009 for $130 each. Both
companies use perpetual inventory systems
Based on the information given above, what amount of cost of goods sold did ABC record in 20X8? = $79*35000 = $2,765,000
Based on the information given above, what amount of cost of goods sold did XYZ record in 20X8? = $90*18,000 = 1,620,000
Based on the information given above, what amount of cost of goods sold must be reported in the consolidated income statement for 20X8? = $79*18000 =
$1,422,000
Based on the information given above, what amount of cost of goods sold must be eliminated from the consolidated income statement for 2008? =
During 2008, ABC produced and sold 35000 chairs @ $90 to XYZ, out of which 18000 were sold to unaffiliated companies for $117. The cost of goods must be
eliminated from consolidated income statement is $ 2,963,000 i.e 79 production cost * 35000 chairs, this cost is common in both companies , so one cost should be
deleted and profit raised by affiliated companies mutually should also be deleted.
Based on the information given above, what amount of cost of goods sold must be eliminated from the consolidated income statement for 2009? A. $187,000 B.
$221,000 C. $1,422,000 D. $2,963,000 with explanation
During 2009, only profit made by ABC on chairs sold in 2009 should be deleted been common in both affiliated companies. So, $187000 should be eliminated from
the consolidated income statement for 2009.