Solution manual advanced accounting 10e by beams ch05

Chapter 5
INTERCOMPANY PROFIT TRANSACTIONS — INVENTORIES
Answers to Questions
1

Profits and losses on sales between affiliated companies are realized for consolidated statement purposes
when the purchasing affiliate resells the merchandise to parties outside of the consolidated entity. If all
merchandise sold to affiliates is resold to outside parties in the same period, there will be no unrealized
profit to eliminate in preparing the consolidated financial statements.

2

Gross profit, rather than net profit, is the concept that should be used in computing unrealized inventory
profits according to SFAS No. 160 (This treatment was also prescribed by ARB No. 51).

3

The amount of unrealized profit to be eliminated in the preparation of consolidated financial statements
is not affected by the existence of a noncontrolling interest. All unrealized profit must be eliminated. In
the case of upstream sales, however, the unrealized profit should be allocated between controlling and
noncontrolling interests.

4

The elimination of intercompany sales and purchases does not affect consolidated net income. This is
because equal amounts are deducted from sales and cost of sales and the net effect on consolidated net
income is nil. The importance of the elimination lies in a correct statement of consolidated sales and cost
of sales.

5

Consolidated working capital is not affected by the elimination of intercompany accounts receivable and
accounts payable balances. Since equal amounts are deducted from current assets and current liabilities,
the effect on the computation "current assets less current liabilities" is nil.

6

Upstream sales are sales from subsidiary to parent company. Downstream sales are sales from parent
company to subsidiary. The importance of this designation lies in the fact that the profit or loss on such
transactions is the selling affiliate's profit or loss. In the case of unrealized profit or loss on downstream
sales, all the profit or loss is assigned to the parent company-seller. But unrealized profit or loss on
upstream sales is profit or loss of the subsidiary-seller and is assigned to the parent company and
noncontrolling interest in relation to their proportionate holdings.

7

Yes. If unrealized profits are not eliminated at year end, consolidated net income will be overstated. The
ending inventory of one year becomes the beginning inventory of the next year, and unrealized profits in
the beginning inventory will understate consolidated net income. The analysis of the effect of unrealized
inventory profits on consolidated net income is basically the same as the analysis for inventory errors.
Like inventory errors, errors in eliminating unrealized profits are self-correcting over any two
accounting periods. Consolidated net income for 2011 is not affected.

8

The noncontrolling interest share is affected by upstream sales if the merchandise has not been resold by
the parent company to outside parties by the end of the accounting period. This is because the
noncontrolling interest share is based on the income of the subsidiary. If the subsidiary has unrealized
profit from intercompany sales, its realized income will be less than its reported income. The
noncontrolling interest share should be based on the realized income of the subsidiary.

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5-1


5-2

Intercompany Profit Transactions — Inventories

9

A parent company's investment income and investment accounts are adjusted for unrealized profits on
intercompany sales to subsidiaries in accordance with the one-line consolidation concept. The parent
company reduces its investment and investment income accounts for the full amount of the unrealized
profits in the year of intercompany sale. When the goods are sold to outside parties by the subsidiary,
the profits of the parent company are realized and the parent company increases its investment and
investment income accounts.

10

Combined cost of goods sold is overstated when there are unrealized profits in the beginning inventory
and understated when there are unrealized profits in the ending inventory. The elimination of unrealized
profits in the beginning inventory reduces (credits) cost of goods sold and the elimination of unrealized
profits in the ending inventory increases (debits) cost of goods sold.

11

The effect of unrealized profits on consolidated cost of goods sold is not affected either by a
noncontrolling interest or by the direction of the intercompany sales. All unrealized profit from both
upstream and downstream sales is eliminated from consolidated cost of goods sold.

12

Unrealized profit in the beginning inventory is reflected in an overstatement of cost of sales and is
eliminated by reducing (crediting) cost of sales and debiting the investment account if a correct equity
method has been used and the intercompany sales are downstream. In the case of upstream sales, cost of
sales is credited and the noncontrolling interest and the investment account are debited proportionately.
When the parent company does not adjust its investment account for unrealized profits from
intercompany sales, the above debits to the investment account would be to retained earnings.

13

There are two equally good approaches for computing noncontrolling interest share when there are
unrealized profits from upstream sales in both beginning and ending inventories. One approach is to
compute realized income of the subsidiary by adding unrealized profits in the beginning inventory to
reported subsidiary net income and deducting unrealized profits in the ending inventory. The
noncontrolling interest share is then equal to the realized income of the subsidiary multiplied by the
noncontrolling interest percentage.
The other approach is to compute the noncontrolling interest percentage in reported subsidiary
net income, in unrealized profits in beginning inventory, and in unrealized profits in ending inventory.
Noncontrolling interest share is then computed by adding the noncontrolling interest percentage in
unrealized profits in the beginning inventory to the noncontrolling interest share of reported income, and
subtracting the noncontrolling interest percentage relating to the unrealized profits in the ending
inventory.

14

The assumption that unrealized profits in an ending inventory are realized in the succeeding period is a
convenience, but it does not result in incorrect measurements of consolidated net income as long as the
unrealized profits at any statement date are correctly determined. This is because any unrealized profits
in beginning inventory that are considered realized are credited to cost of sales. The same items will

appear as unrealized profits in the ending inventory if they remain unsold, and the elimination of these
items results in debiting cost of sales for the same amount. Thus, the working paper effects are offsetting
as illustrated in the following working paper entries, which assume $5,000 unrealized profits from
downstream sales.
Investment in subsidiary (retained earnings)
Cost of sales

5,000

5,000

To eliminate unrealized profit in beginning inventory.

Cost of sales

5,000
Inventory

5,000

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Chapter 5

5-3

To eliminate unrealized profit in ending inventory.

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5-4

Intercompany Profit Transactions — Inventories

SOLUTIONS TO EXERCISES
Solution E5-1
1
2
3
4

a
d
a
c

5
6
7
8

c
a
a
c

Solution E5-2 [AICPA adapted]
1

a

2

c
Unrealized profits from intercompany sales with Kent are eliminated from
the ending inventory: $320,000 combined current assets less $12,000
unrealized profit ($60,000 ´ 20%).

3

c
Combined cost of sales of $750,000 less $250,000 intercompany sales

Solution 5-3
1

d
Philly's separate income (in thousands)
Add: Share of Silvio's income ($500 ´ 100%)

$1,000
500

Add: Realization of profit deferred in 2009
$1,500 - ($1,500/150%)

500

Less: Unrealized profit in 2010 inventory
$1,200 - ($1,200/150%)

2

3

(400)

Controlling share of consolidated net income

$1,600

d
Combined sales
Less: Intercompany sales

$1,400
(50)

Consolidated sales

$1,350

c
Combined cost of sales
Less: Intercompany purchases

$

680
(50)

Less: Unrealized profit in beginning inventory

(4)

Add: Unrealized profit in ending inventory

10

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Chapter 5

5-5

Consolidated cost of sales

$

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636


5-6

Intercompany Profit Transactions — Inventories

Solution E5-4
1

b
Pride's share of Sedita's income ($60,000 ´ 80%)
Less: Unrealized profit in ending inventory

$

($20,000 ´ 50% unsold ´ 80% owned)

2

(8,000)

Income from Sedita

$

40,000

d
Combined cost of sales
Less: Intercompany sales

$

450,000
(100,000)

Add: Unrealized profit in ending inventory

3

48,000

10,000

Consolidated cost of sales

$

360,000

b
Reported income of Sedita
Unrealized profit

$

60,000
(10,000)

Sedita's realized income

50,000

Noncontrolling interest percentage
Noncontrolling interest share

20%
$

10,000

Solution E5-5
1

2

c
Combined sales
Less: Intercompany sales

$1,800,000
(400,000)

Consolidated sales

$1,400,000

c
Unrealized profit in beginning inventory
$100,000 - ($100,000/125%)

$

20,000

$

25,000

Unrealized profit in ending inventory
$125,000 - ($125,000/125%)
3

b
Combined cost of goods sold
Less: Intercompany sales

$1,440,000
(400,000)

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Chapter 5

5-7

Less: Unrealized profit in beginning inventory
$100,000 - ($100,000/125%)

(20,000)

Add: Unrealized profit in ending inventory
$125,000 - ($125,000/125%)
Consolidated cost of goods sold

25,000
$1,045,000

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5-8

Intercompany Profit Transactions — Inventories

Solution E5-6
1

a
Patti's separate income
Add: Income from Susan (below)

$200,000
144,550

Controlling share of consolidated net income

$344,550

Susan's reported income
Less: Patents amortization

$200,000
(20,000)

Add: Unrealized profit in beginning inventory
[$112,500 - ($112,500/150%)]

37,500

Less: Unrealized profit in ending inventory
[$33,000 - ($33,000/150%)]

2

(11,000)

Susan’s adjusted and realized income

$206,500

Patti’s 70% controlling share of Susan’s realized income
Noncontrolling interest share (30%)

$144,550
$ 61,950

c
Packman's share of Slocum's reported net loss
($150,000 loss ´ 60%)

$(90,000)

Add: Unrealized profit in ending inventory

($200,000 ´ 1/4 unsold)
Income from Slocum
Packman's separate income

3

(50,000)
(140,000)
300,000

Controlling share of consolidated net income

$160,000

b
Santini's reported net income
Add: Realized profit in beginning inventory

$300,000

$150,000 - ($150,000/1.25)

30,000

Less: Deferred profit in ending inventory
$200,000 - ($200,000/1.25)
Income from Santini

(40,000)
$290,000

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Chapter 5

5-9

Parnell’s 75% controlling share of Santini’s income

$217,500

Noncontrolling interest share (25%)

$ 72,500

Solution E5-7
(in thousands)
Pansy's separate income
Add: 80% of Sheridan's reported income

2009
$300

2010
$400

2011
$350

400

440

380

30

40

(40)

(20)

Add: Realization of profits in
beginning inventory
Less: Unrealized profits in ending
Inventory
Controlling share of consolidated NI

(30)
$670

$830

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$750

5-10

Intercompany Profit Transactions — Inventories

Solution E5-8
Pycus Corporation and Subsidiary
Consolidated Income Statement
for the year ended December 31, 2009
(in thousands)
Sales ($400 + $100 - $40 intercompany sales)
Cost of sales ($200 + $60 - $40 intercompany

$

460

purchases + $10 unrealized profit in ending inventory)

(230)

Gross profit

230

Other expenses ($100 + $30)

(130)

Cnsolidated net income

100

Less: Noncontrolling interest share ($10 ´ 20%)
Controlling share of consolidated net income

(2)
$

98

Solution E5-9
1

Noncontrolling interest share
Seven's reported net income
Add: Intercompany profit from upstream sales in

$ 50,000

beginning inventory

5,000

Less: Intercompany profit from upstream sales in
ending inventory

2

(10,000)

Seven’s adjusted and realized income

$ 45,000

Noncontrolling interest share (40%)

$ 18,000

Consolidated sales
Combined sales
Less: Intercompany sales

$1,250,000
100,000

Consolidated sales

$1,150,000

Consolidated cost of sales
Combined cost of sales
Less: Intercompany sales

$

650,000
(100,000)

Add: Intercompany profit in ending inventory

10,000

Less: Intercompany profit in beginning inventory

(5,000)

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Chapter 5

5-11

Consolidated cost of sales

$

555,000

$

300,000

Total Consolidated Income
Combined income
Less: Intercompany profit in ending inventory

(10,000)

Add: Intercompany profit in beginning inventory

Total Consolidated Income

5,000
$

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295,000


5-12

Intercompany Profit Transactions — Inventories

Solution E5-10
Papillion Corporation and Subsidiary
Consolidated Income Statement
December 31, 2011
(in thousands)
Sales ($1,000 + $500 - $90 intercompany)
Cost of sales ($400 + $250 - $90 intercompany -

$1,410

$10 unrealized profit in beginning inventory + $15
unrealized profit in ending inventory

(565)

Gross profit

845

Depreciation expense

(170)

Other expenses ($90 + $60)

(150)

Total consolidated income

525

Less: Noncontrolling interest share ($150 + $10 profit
in beginning inventory - $15 profit in end. inventory) ´ 20%
Controlling interest share of consolidated net income

(29)
$

496

Cost of investment in Saiki at January 1, 2010

$

600

Implied fair value of Saiki ($600 / 80%)

$

750

Book value of Saiki
Goodwill

$

(700)
50

Supporting computations

Solution E5-11
1

b
Income as reported
Add: Realization of profits in beginning inventory

$

$120,000 - ($120,000/1.2)

200,000
20,000

Less: Unrealized profits in ending inventory
$360,000 - ($360,000/1.2)
Realized income

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(60,000)
160,000


Chapter 5

5-13

Percent ownership
Income from Suey
2

c
Suey's equity as reported ($3,400,000 + $2,100,000)
Less: Unrealized profit in ending inventory
Realized equity

60%
$

96,000

$5,500,000
(60,000)

5,440,000

Noncontrolling share
Noncontrolling interest December 31, 2011
3

b
Realized equity
Controlling share
Investment balance December 31, 2011

40%
$2,176,000

$5,440,000
60%
$3,264,000

Note: The excess fair value over book value is fully amortized.
Therefore, the investment balance of $3,264,000 plus the noncontrolling
interest of $2,176,000 is equal to the $5,440,000 realized equity at the
balance sheet date.

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5-14

Intercompany Profit Transactions — Inventories

Solution E5-12
Pullen Corporation and Subsidiary
Consolidated Income Statement
for the year ended December 31, 2009
Sales ($1,380,000 - $120,000 intercompany sales)
Cost of sales ($920,000 - $120,000 - $5,000a + $12,000b)

$1,260,000
(807,000)

Gross profit

453,000

Operating expenses

(160,000)

Total consolidated income

293,000

Less: Noncontrolling interest share [$40,000 - ($12,000 ´ .2)]
Controlling share of consolidated net income
a
b

(37,600)
$

255,400

Unrealized profit in beginning inventory (downstream) ($180,000 - $160,000) ´ .25
= $5,000
Unrealized profit in ending inventory (upstream ($120,000 - $90,000) ´ .4 =
$12,000

SOLUTIONS TO PROBLEMS
Solution P5-1
Proctor Corporation and Subsidiary
Consolidated Statement of Income and Retained Earnings
for the year ended December 31, 2010
Sales ($1,300,000 + $650,000 - $80,000 intercompany sales)
Less: Cost of sales ($800,000 + $390,000 - $80,000 inter-

$1,870,000

company purchases - $12,000 unrealized profit in beginning
inventory + $16,000 unrealized profit in ending inventory)

(1,114,000)

Gross profit

756,000

Other expenses ($340,000 + $160,000)

(500,000

Consolidated net income

256,000

Noncontrolling interest share($100,000+$12,000 - $16,000) ´ 10%
Controlling share of consolidated net income
Add: Beginning consolidated retained earnings
Less: Dividends for the year

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(9,600)
246,400
369,200
(100,000)


Chapter 5

5-15

Consolidated retained earnings December 31

$

515,600

$

925,000

(300,000)

Solution P5-2
1

Consolidated cost of sales — 2011
Combined cost of sales ($625,000 + $300,000)
Less: Intercompany purchases
Add: Profit in ending inventory

24,000

Less: Profit in beginning inventory
Consolidated cost of sales
2

Noncontrolling interest share — 2011
Slam's net income ($600,000 - $300,000 - $150,000)
Add: Profit in beginning inventory

(12,000)
$

637,000

$

150,000
12,000

Less: Profit in ending inventory

(24,000)

Slam's realized income

138,000

Noncontrolling interest percentage
Noncontrolling interest share

10%
$

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13,800


5-16

Intercompany Profit Transactions — Inventories

Solution P5-2 (continued)
3

Consolidated Controlling share of NI— 2011
Consolidated sales ($900,000 + $600,000 - $300,000)
Less: Consolidated cost of sales

$1,200,000
(637,000)

Less: Consolidated expenses ($225,000 + $150,000)

(375,000)

Less: Noncontrolling interest share
Controlling share of consolidated net income
Alternatively,
Putt's separate income
Add: Income from Slam
Controlling share of consolidated net income
4

Noncontrolling interest at December 31, 2011
Equity of Slam December 31, 2011
Less: Unrealized profit in ending inventory

(13,800)
$

174,200

$

50,000
124,200

$

174,200

$

520,000
(24,000)

Noncontrolling interest percentage
Noncontrolling interest December 31

10%
$

49,600

Solution P5-3
1
2010

Inventories appearing in consolidated balance sheet at December 31,
Beginning inventory — Potter ($60,000 - $4,000a)
Beginning inventory — Scan ($38,750 - $7,750b)

$ 56,000
31,000

Beginning inventory — Tray ($24,000 - 0)
Inventories December 31

24,000
$111,000

Intercompany profit:
a

b

Potter:
Inventory acquired intercompany ($60,000 ´ 40%)
Cost of intercompany inventory ($24,000/1.2)

$ 24,000
(20,000)

Unrealized profit in Potter's inventory

$

Scan:
Inventory acquired intercompany ($38,750 ´ 100%)
Cost of intercompany inventory ($38,750/1.25)

$ 38,750
(31,000)

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4,000

Chapter 5

5-17
Unrealized profit in Scan's inventory

2
2011

$

7,750

Inventories appearing in consolidated balance sheet at December 31,
Ending inventory — Potter ($54,000 - $4,500c)
Ending inventory — Scan ($31,250 - $6,250d)

$ 49,500
25,000

Ending inventory — Tray ($36,000 - 0)
Inventories December 31

36,000
$110,500

Intercompany profit:
c

d

Potter:
Inventory acquired intercompany ($54,000 ´ 50%)
Cost of intercompany inventory ($27,000/1.2)

$ 27,000
(22,500)

Unrealized profit in Potter's inventory

$

Scan:
Inventory acquired intercompany ($31,250 ´ 100%)
Cost of intercompany inventory ($31,250/1.25)

$ 31,250
(25,000)

Unrealized profit in Scan's inventory

$

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4,500

6,250

5-18

Intercompany Profit Transactions — Inventories

Solution P5-4
1

Plier's income from Stuff
75% of Stuff's net income

2009
300,000 $

$

2010
337,500 $

2011
262,500

Unrealized profit in December 31,
2009 inventory (downstream)
($200,000 ´ 1/2) ´ 100%

(100,000)

100,000

Unrealized profit in December 31,

2010 inventory (upstream)
$100,000 ´ 75%
Plier's income from Stuff

2

$

200,000 $

362,500 $

75,000
337,500

Plier's net income
Plier's separate income
Add: Income from Stuff
Plier's net income

3

(75,000)

$1,800,000 $1,700,000 $2,000,000
200,000

362,500

337,500

$2,000,000 $2,062,500 $2,337,500

Consolidated net income
Separate incomes of Plier and
Stuff combined

$2,200,000 $2,150,000 $2,350,000

Unrealized profit in December 31,
2009 inventory

(100,000)

100,000

Unrealized profit in December 31,
2010 inventory
Total consolidated income

(100,000)
2,100,000 2,150,000

100,000
2,450,000

Less: Noncontrolling interest share
2009 $400,000 ´ 25%
2010 ($450,000 - $100,000) ´ 25%

(100,000)
(87,500)

2011 ($350,000 + $100,000) ´ 25%
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(112,500)


Chapter 5

5-19

Controlling share of net income

$2,000,000 $2,062,500 $2,337,500

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5-20

Intercompany Profit Transactions — Inventories

Solution P5-5
Pane Corporation and Subsidiary
Consolidation Working Papers
for the year ended December 31, 2010
(in thousands)
Adjustments and

Pane
100% Seal
Eliminations
Income Statement
Sales

$

800

$ 400

Income from Seal

102

Cost of sales

400 *

200 *

Depreciation expense

110 *

40*

Other expenses

192 *

60*

Net income

$

200

Retained Earnings
Retained earnings — Pane

$

600

Retained earnings — Seal

100ü

Dividends

100 *

50*

Balance Sheet
Cash

$

54

Receivables — net

12

a 120
c 20

472 *
150 *

f

6

258 *
$

200

600

200ü

700

b

$ 100

Net income

$

$1,080

d 102

$ 380

Retained earnings
December 31

a 120

Consolidated
Statements

e 380
200
d

50

100 *

$ 430

$

700

$

$

91

37

90

60

g

17

133

100

80

b

12

168

Other assets

70

90

160

Land

50

50

100

Buildings — net

200

150

350

Equipment — net

500

400

900

Investment in Seal

736

Inventories

c

20

d 52
e 704

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Chapter 5

5-21

Patents

e

Accounts payable

$1,800

$ 867

$

$

160

47

Other liabilities

340

90

Common stock, $10 par

600

300

Retained earnings

700ü

430ü

$1,800

24

f

6

18
$1,920

g

17

$

190
430

e 300

$ 867

600
700
$1,920

Supporting computations

Unrealized profit in beginning inventory ($40,000 ´ 1/2) = $20,000
Unrealized profit in ending inventory ($48,000 ´ 1/4) = $12,000
Seal's income of $100,000 plus $20,000 profit in beginning inventory, less $12,000
profit in ending inventory, and less $6,000 patents amortization equals $102,000
income from Seal.

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5-22

Intercompany Profit Transactions — Inventories

Solution P5-6
Patty Corporation and Subsidiary
Consolidation Working Papers
for the year ended December 31, 2010
(in thousands)
Adjustments and
Patty
Sue 75%
Eliminations
Income Statement
Sales

$

600

$ 400

Income from Sue

102.5

Cost of sales

270 *

210 *

Operating expenses

145 *

40*

a 130

$

$

287.5ü

Retained Earnings
Retained earnings — Patty

$

182.5

b

20

a 130
c 10

Controlling share of NI

287.5ü

Dividends

150 *

Retained earnings
December 31

$

320

Balance Sheet
Cash

$

85

Accounts receivable

165

90

e

$

325

$

37.5 *
287.5

$

182.5

37.5

$ 150ü

$

360 *
185 *

f

Retained earnings — Sue

870

d 102.5

Consolidated net income
Noncontrolling int.share
Controlling share of NI

Consolidated
Statements

90

150ü

287.5

50*

d
f

37.5
12.5

150 *

$ 190

$

320

$

$

115

30
100

g

15

h

15

b

20

250

Dividends receivable

15

Inventories

60

80

Land

80

50

130

Buildings — net

230

100

330

Equipment — net

200

140

340

Investment in Sue

385

c

10

d 65
e 330

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120


Chapter 5

5-23

Goodwill

e 200
$1,220

$ 500

$

225

$ 100

g

15

Dividends payable

70

20

h

15

Other liabilities

155

40

Common stock, $10 par

450

150

Retained earnings

320ü

190ü

Accounts payable

$1,220

200
$1,485

$

310
75
195

e 150

450
320

$ 500

Noncontrolling interest January 1

e

110

Noncontrolling interest December 31

f

25

135
$1,485

*

Deduct

Supporting computations
Investment in Sue at January 1, 2010
Implied fair value of Sue ($300,000 / 75%)

$300,000
$400,000

Book value of Sue
Goodwill

200,000

$200,000

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5-24

Intercompany Profit Transactions — Inventories

Solution P5-7
Preliminary computations
Investment cost
Implied fair value of Susan

$270,000
$300,000

Less: Book value of Susan
Patents

250,000
$ 50,000

Patents amortization

$50,000/10 years = $5,000 per year

Upstream sales
Unrealized profit in
$28,000 - ($28,000

Unrealized profit in
$42,000 - ($42,000

December
¸ 1.4) =
December
¸ 1.4) =

31, 2009 inventory of Poly
$8,000
31, 2010 inventory of Poly
$12,000

Income from Susan
Susan's reported net income
Less: Patents amortization
Less: Unrealized profit in ending inventory

$100,000
(5,000)
(12,000)

Add: Unrealized profit in beginning inventory

8,000

Susan’s adjusted and realized income

$ 91,000

Poly’s 90% controlling share of Susan’s income
10% noncontrolling interest share of Susan’s income

$ 81,900
$ 9,100

Investment balance
Initial investment cost
Increase in Susan's net assets from December 31, 2008

$270,000

to December 31, 2010 ($70,000 ´ 90%)

63,000

Patent amortization for 2 years (90%)

( 9,000)

Unrealized profit in December 31, 2010 inventory

(10,800)

Investment balance December 31, 2010

$313,200

©2009 Pearson Education, Inc. publishing as Prentice Hall

Chapter 5

5-25

Solution P5-7 (continued)
Poly Corporation and Subsidiary
Consolidation Working Papers
for the year ended December 31, 2010
Poly
Income Statement
Sales

$ 819,000

Income from Susan

Adjustments and
Eliminations

Susan 90%
$ 560,000

81,900

a 560,000
d

81,900

Cost of sales

546,000*

400,000* b

12,000

Other expenses

154,400*

60,000* f

5,000

Consolidated
Statements
$ 819,000

a 560,000
c
8,000

390,000*
219,400*

Consolidated net income

$ 209,600

Noncontrolling int.share
Controlling share of NI

h
$ 200,500

Retained Earnings
Retained earnings — Poly

$ 120,000

Retained earnings — Susan

9,100

9,100*
$ 200,500

$ 100,000

$ 120,000
$

70,000

Controlling share of NI

200,500ü

100,000ü

Dividends

100,000*

50,000*

e

70,000
200,500
d
h

45,000
5,000

100,000*

Retained earnings
December 31

$ 220,500

$ 120,000

$ 220,500

Balance Sheet

Cash

$

$

$ 125,300

75,300

50,000

Inventory

42,000

80,000

b

12,000

110,000

Other current assets

60,000

20,000

g

10,000

70,000

Plant assets — net

300,000

300,000

Investment in Susan

313,200

Patents
$ 790,500

$ 450,000

600,000
c

7,200

e

45,000

d 36,900
e 283,500
f
5,000

40,000
$ 945,300

©2009 Pearson Education, Inc. publishing as Prentice Hall