Reference no: EM133157592

Question - P Corporation acquired 80 percent of the outstanding voting stock of S Inc., on January 1, 2020, when S inc. had a net book value of $540,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $7,000 per year.

P Corp's 2021 net income before consideration of its relationship with S Inc. (and before adjustments for intra-entity sales) was $440,000. S Inc.reported net income of $250,000. P Corp declared $130,000 in dividends during this period; S Inc.paid $54,000 in dividends. At the end of 2021, P Corp had an inventory balance of $280,000 and S Inc. had an inventory balance of $104,000.

During 2020, intra-entity sales of $145,000 (original cost of $70,000) were made. Only 20 percent of this inventory was still held within the consolidated entity at the end of 2020. In 2021, $230,000 in intra-entity sales were made with an original cost of $73,000. Of this merchandise, 30% had not been resold to outside parties by the end of the year.

Required -

a. What is consolidated net income for P Corp and its subsidiary in 2021?

b. If the intra-entity sales were upstream, how would consolidated net income be allocated to the controlling and noncontrolling interest in 2021?

c. If the intra-entity sales were downstream, how would consolidated net income be allocated to the controlling and noncontrolling interest in 2021?

d. What is the consolidated balance in the ending Inventory account as of December 31, 2021?