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Intercompany Transfers

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Intercompany Transfers

28. Asphalt acquired 70 percent of Broadway on June 11, 1993. Based on the purchase price, an intangible of $300,000 was recognized and is being amortized at the rate of $10,000 per year. The 2004 financial statements are as follows:

Asphalt Broadway
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 800,000 $ 600,000
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . (535,000) (400,000)
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . (100,000) (100,000)
Dividend income . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 -0-
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 200,000 $ 100,000
Retained earnings, 1/1/04 . . . . . . . . . . . . . . . . . . $1,300,000 $ 850,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 100,000
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . (100,000) (50,000)
Retained earnings, 12/31/04 . . . . . . . . . . . . . . . . $1,400,000 $ 900,000
Cash and receivables . . . . . . . . . . . . . . . . . . . . . . $ 400,000 $ 300,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298,000 700,000
Investment in Broadway . . . . . . . . . . . . . . . . . . . . 902,000 -0-
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 600,000
Accumulated depreciation . . . . . . . . . . . . . . . . . . (300,000) (200,000)
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,300,000 $1,400,000

Asphalt Broadway
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 600,000 $ 400,000
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 100,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 1,400,000 900,000
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,300,000 $1,400,000

Asphalt sells inventory costing $72,000 to Broadway during 2003 for $120,000. At year's end, 30 percent is left. Asphalt sells inventory costing $200,000 to Broadway during 2004 for $250,000. At year's end, 20 percent is left. Under these circumstances, determine the consolidated balances for the following accounts:

Sales
Cost of Goods Sold
Operating Expenses
Dividend Income
Noncontrolling Interest in Consolidated Income
Inventory
Noncontrolling Interest in Subsidiary, 12/31/04

Assuming that the intercompany transfers were all made from Broadway to Asphalt.

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FOLLOW UP FROM OTA:
Both of the requirements refer to one situation. There are no two seprate situations. Broadway ...

Solution Summary

The solution explains how to calculate the consolidated balances when there are intercompany transfers

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