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question several years ago polar inc acquired an 80 interest in icecap corp the book 4291064

Question

Several years ago Polar Inc. acquired an 80% interest in Icecap Corp. The book values of Icecap's asset and liability accounts at that time were considered to be equal to their fair values. Polar's acquisition value corresponded to the underlying book value of Icecap so that no allocations or goodwill resulted from the transaction. The following selected account balances are from the individual financial records of these two companies as of December 31, 2012:

Sales

The following transactions have occurred between Polar and Icecap. Polar accounts for its investment in Icecap using the initial value method:

(a) Icecap sells inventory to Polar at a markup equal to 25% of cost. Intra-entity transfers were $130,000 in 2011 and $165,000 in 2012. Of this inventory, $39,000 of the 2011 transfers were retained and then sold by Polar in 2012, while $55,000 of the 2012 transfers were retained and then sold by Polar in 2013.

(b) Polar sold a building to Icecap on January 1, 2010 for $112,000, although the book value of this asset was only $70,000 on that date. The building had a five-year remaining useful life and was to be depreciated using the straight-line method with no salvage value.

(c) Icecap sold land to Polar on January 1, 2009 for $100,000, although the book value of this asset was only $65,000 on that date. Polar employs this land in its overall operations.

Required:

(1) In good form, prepare the consolidation elimination entries needed in connection with transactions (a) – (c) at December 31, 2012. Label those entries: Requirement (1a), (1b), and (1c), as corresponds to the original transactions.

(2) In good form, prepare a schedule showing the noncontrolling interest in the consolidated 2012 net income.

(3) In good form, prepare the consolidation elimination entries needed in connection with transactions (a) – (c) at December 31, 2013. Label those entries: Requirement (3a), (3b), and (3c), as corresponds to the original transactions.

 

Polar Inc.

Icecap Corp.

Sales

896,000

504,000

COGS

406,000

276,000

Operating Expeneses

210,000

147,000

Retained Earnings 1/1/2012

1,036,000

252,000

Inventory

484,000

154,000

Land

250,000

100,000

Buildings, Net

501,000

220,000

Investment Income

Not Given

 

 

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