Intercompany Gain Transactions – Plant Assets

INTERCOMPNY GAIN TRANSACTIONS PLANT ASSETS

INTERCOMPANY GAIN TRANSACTIONS PLANT ASSETS

Common transaction is the sale of land1.Sale of land at book value

Parent EntriesCash 100,000Land100,000Subsidiary EntriesLand 100,000Cash100,0001Assume land costing 100,000 was sold by P Company to its subsidiary S company for the same amount.Intercompany gain on sale of non-depreciable assets2

Common transaction is the sale of land1.Sale of land at book value

Observation:Land continues to be valued at costNo gain was recognizedConsolidated net income and balance sheet would not be misstated1Intercompany gain on sale of non-depreciable assets3

Common transaction is the sale of land2.Sale of land above book value

Parent EntriesCash 175,000Land 100,000Gain on sale 75,000Subsidiary EntriesLand 175,000Cash 175,0001Assume land costing 100,000 was sold by P Company to its subsidiary S company for 175,000.Intercompany gain on sale of non-depreciable assets4


Gain on sale 75,000Land 75,0001Upon consolidation eliminating entries shall be performedBasis:Entity ConceptPrudenceAsset valuationIntercompany gain on sale of non-depreciable assets5


1Assignment of Unrealized Profit Elimination

SaleEliminationDownstreamAgainst controlling interestUpstream: Wholly owned subsidiary Against controlling interest Partially owned subsidiary Proportionately against controlling and non-controlling interest

Intercompany gain on sale of non-depreciable assets6

Illustration: Assume P Company owns 80% of the common stock of S Company. The companies report net income from their own operation:

2P Company500,000S Company300,000Downstream SalePs net income from own operations500,000Unrealized Intercompany Gain(75,000)Ps realized net income425,000Ss net income from own operations300,000Consolidated net income725,000Attributable to NCI (300,000 x 20%)(60,000)Attributable to parent (controlling interest)665,000Intercompany gain on sale of non-depreciable assets7

Illustration: Assume P Company owns 80% of the common stock of S Company. The companies report net income from their own operation:

2P Company500,000S Company300,000Upstream SalePs net income from own operations 500,000Ss net income from own operations 300,000Unrealized Intercompany Gain (75,000) 225,000Consolidated net income 725,000Attributable to NCI (225,000 x 20%) (45,000)Attributable to parent (controlling interest) 680,000Intercompany gain on sale of non-depreciable assets8

Subsequent Disposition of asset-unrealized intercompany gain is viewed as being realized at the time the assets are resold to outsiders

2Downstream SaleCash225,000Land175,000Gain on sale50,000

Elimination EntriesRetained Earnings, January 75,000Gain on sale 75,000

Continuing the illustration, the land was sold to outsiders for 225,000.Upstream SaleCash225,000Land175,000Gain on sale50,000

Elimination EntriesRetained Earnings, January 60,000NCI15,000Gain on sale 75,000


Subsequent Disposition of assetThe companies report net income from their own operation:

2P Company500,000S Company300,000Downstream SalePs net income from own operations500,000Realized Intercompany Gain 75,000Ps realized net income575,000Ss net income from own operations300,000Consolidated net income875,000Attributable to NCI (300,000 x 20%)(60,000)Attributable to parent (controlling interest)815,000Upstream SalePs net income from own operations 500,000Ss net income from own operations 300,000Realized Intercompany Gain 75,000 375,000Consolidated net income 875,000Attributable to NCI (375,000 x 20%) (75,000)Attributable to parent (controlling interest) 800,000Intercompany gain on sale of non-depreciable assets10

ObservationEliminating entry is only required when intercompany sale of non-depreciable asset results to a gainUpstream sale from a partially owned subsidiary affects both controlling interest and non-controlling interest.Unrealized gain becomes realized upon sale of the asset to an outside entity


-Unrealized intercompany gains on a depreciable asset are viewed as being realized gradually over the remaining life of the asset as it is used by the purchasing affiliate.

Downstream Sale

Cash70,000Equipment 70,000Equipment 50,000Cash 70,000Gain on Sale 20,000Dep. Exp 7,000Acc. Dep. 7,000Intercompany gain on sale of depreciable assets3Asset is overstated, Balance sheet is overstatedExpense is overstated, Income is understated12

Illustration: Assume on Dec. 31, 200A P sells equipment to S, its subsidiary for 70,000, it originally costs 90,000 when purchased 3 years ago and is depreciated over a total life of 10 years using the straight line method of depreciation with no residual value. . P owns 80% of S outstanding shares.

Original Cost90,000Acc. Dep.Annual Dep.9000No. of yearsx 327,000Book Value63,000

Intercompany gain on sale of depreciable assets3Sales Price70,000Book Value(63,000)Gain on sale7,000

P Company entries Cash70,000Acc. Dep.27,000 Equipment 90,000 Gain on sale 7,000

S Company entries Equipment 70,000Cash 70,000

All dividends received by P Company are from S Company.13

3

1.Dividend Income 24,000NCI 6,000 Dividends declared S Co. 30,0002.NCI in net Income of S CO. 10,000 NCI 10,000

3.Common Stock200,000RE100,000 Inv. In S Co. 240,000 NCI 60,004.Machinery & Equip. 20,000Gain on Sale 7,000 Acc. Dep. 27,00014

Consolidated Net Income-200APs net income from own operations (P171,000-24,000) 147,000Unrealized gain on sale of equipment (downstream sale) ( 7,000)Ps realized net income 140,000S net income from own operations 50,000Consolidated net income 190,000Attributable to NCI (50,000 x 20%) ( 10,000)Attributable to parent (Controlling Interest) 180,000

415

Consolidated Retained Earnings-200ARetained earnings, December 31,2010- P 411,000Unrealized gain on sale of equipment (downstream sale) ( 7,000)Realized Retained Earnings, December 31 404,000Add: Ps share in undistributed income of S 16,000(50,000 30,000) x 80%

Consolidated retained earnings, December 31,2010 420,000

4Share in S net income S net income50,000 P Co.s proportionate share* 80% 40,000Less: Dividend received (24,000)16

The NCI of 64,000 may be verified by the following computations:

Net assets (S/E), 1/1/2010 S Company300,000Increase in earnings (50,000 30,000) 20,000Net assets, 12/31/10 S Company320,000

NCI (320,000 x 20%) 64,000NCI beg. 60,000Share in net income 10,000NCI Dividend(6,000)

517Separate Company Entries 200BBooks of S CompanyDuring 200B, S will begin depreciating the P70,000 cost of the equipment purchased from P over its remaining life of seven (7) years using the straight line method. The depreciation of P10,000 per year (70,000/7 years) is recorded as follows by S:

Depreciation expense10,000Accumulated Depreciation10,000To record depreciation for 2011.

P Co. received dividend of 32,000 from S Co.

Intercompany gain on sale of depreciable assets6

1.Dividend Income 32,000NCI 8,000 Dividends declared S Co. 40,0002.NCI in net Income of S CO. 14,800 NCI 14,8003.Common Stock200,000RE100,000 Inv. In S Co. 240,000 NCI 60,005. Machinery & Equip. 20,000 RE-P Co. 7,000 Acc. Dep. 27,0004.R E-S Company Jan 1 4,000 NCI 4,000Depreciation recorded by S10,000Should be depreciation (9,000)Overstatement (realized gain) 1,0006. Acc. Dep. 1,000 Depreciation Exp. 1,0007. R.E-S Company, Jan 1 16,000 R.E-P Company, Jan 1 16,000619

Consolidated Net Income-200BPs net income from own operations (P191,000-32,000) 159,000Realized gain on sale of equipment (downstream sale) 1,000Ps realized net income 160,000S net income from own operations 74,000Consolidated net income 234,000Attributable to NCI (74,000 x 20%) ( 14,800)Attributable to parent (Controlling Interest) 219,200

520

Consolidated Retained Earnings-200BRetained earnings, December 31,2010- P 542,000Unrealized gain on sale of equipment (7000-1000) ( 6,000)P Co.s share in undistributed prior year earnings 16,000Realized Retained Earnings, December 31 552,000Add: Ps share in undistributed income of S 27,200(74,000 40,000) x 80%

Consolidated retained earnings, December 31,2010 579,200

7Share in S net income S net income74,000 P Co.s proportionate share* 80% 59,200Less: Dividend received (32,000)21


Net assets (S/E), 1/1/200B S Company320,000Increase in earnings (74,000 40,000) 34,000Net assets, 12/31/B S Company354,000

NCI (354,000 x 20%) 70,800NCI beg. 64,000Share in net income 14,800NCI Dividend(8,000)

722

Intercompany gain on sale of depreciable assets3Observation on Downstream sale of depreciable assetUnrealized gain(loss) shall be fully charged against the parent.Unrealized gain(loss) will be gradually realized through the passage of time, when the Subsidiary benefited upon the use of the asset.Realized gain(loss) is the difference between the should have been depreciation and the depreciation recorded by the parent.To eliminate unrealized gain(loss) in the subsequent period retained earnings of the parent shall be used.

23Basically consolidation in the subsequent years is the same as the consolidation in the next year after the sale ( as shown in the preceding example). Elimination procedures would include:

Restating the asset sold and its accumulated depreciation.Eliminating excess or adding lacking depreciation.Reducing beginning retained earnings by the amount of the unrealized gain or loss at the beginning of the year.

Consolidation in Subsequent Years 6Machinery and Equipment 20,000RE, Jan. 1 6,000 Acc. Dep.26,000Book Value on consolidated FS 90,000Book Value on S books (70,000)Understatement 20,000

Basically consolidation in the subsequent years is the same as the consolidation in the next year after the sale ( as shown in the preceding example). Elimination procedures would include:


Consolidation in Subsequent Years 6Machinery and Equipment 20,000RE, Jan. 1 6,000 Acc. Dep.26,000Unrealized gain on sale 200A7,000Realized gain, 200B(1,000)Unrealized gain on sale, Jan. 1 200C6,000Basically consolidation in the subsequent years is the same as the consolidation in the next year after the sale ( as shown in the preceding example). Elimination procedures would include:


Consolidation in Subsequent Years 6Machinery and Equipment 20,000RE, Jan. 1 6,000 Acc. Dep.26,000Acc. Dep. Base on consolidated FSDec.31,200B [(90,000/10)*4]36,000Acc. Dep. Base on S booksDec.31,200B [(70,000/7)*1](10,000)Understatement26,000Basically consolidation in the subsequent years is the same as the consolidation in the next year after the sale ( as shown in the preceding example). Elimination procedures would include:


Consolidation in Subsequent Years 6Machinery and Equipment 20,000RE, Jan. 1 6,000 Acc. Dep.26,000Depreciation recorded by S10,000Should be depreciation (9,000)Overstatement (realized gain) 1,000Acc. Dep. 1,000Depreciation 1,000

Consolidation in Subsequent Years 6Machinery and Equipment 20,000RE, Jan. 1 6,000 Acc. Dep.26,000Change in estimated useful life of Asset Upon Intercompany Sale-The new useful life will be the basis for depreciation both by the purchasing affiliate and for the purpose of preparing consolidated financial statementTo continue the illustration assume on 200C it was known that the correct remaining life of the asset was 3 years. Acc. Dep.2,000Depreciation 2,000Depreciation recorded by SDec.31,200C [(70,000-10,000)/3]20,000Should be depreciationDec.31,200C [(90,000-36,000)/3](18,000)Overstatement 2,000

-Unrealized intercompany gains on a depreciable asset are viewed as being realized gradually over the remaining life of the asset as it is used by the purchasing affiliate.

Upstream Sale

Cash70,000Equipment 70,000Equipment 50,000Cash 70,000Gain on Sale 20,000Dep. Exp 7,000Acc. Dep. 7,000Intercompany gain on sale of depreciable assets3Asset is overstated, Balance sheet is overstatedExpense is overstated, Income is understatedGain on sale will appear on the income statement of subsidiary, part of it will pertain to the parent company while part will go to NCI29

Illustration: Assume on Dec 31, 200A S sells equipment to P, its parent for 70,000, it originally costs 90,000 when purchased 3 years ago and is depreciated over a total life of 10 years using the straight line method of depreciation with no residual value. P owns 80% of S outstanding shares.Original Cost90,000Acc. Dep.Annual Dep.9000No. of yearsx 327,000Book Value63,000

Intercompany gain on sale of depreciable assets3Sales Price70,000Book Value(63,000)Gain on sale7,000

S Company entries Cash70,000Acc. Dep.27,000 Equipment 90,000 Gain on sale 7,000

P Company entries Equipment 70,000Cash 70,000

All dividends received by P Company are from S Company.30

3

1.Dividend Income 24,000NCI 6,000 Dividends declared S Co. 30,0002.NCI in net Income of S CO. 10,000 NCI 10,000

3.Common Stock200,000RE100,000 Inv. In S Co. 240,000 NCI 60,004.Machinery & Equip. 20,000Gain on Sale 7,000 Acc. Dep. 27,000S Income57,000Less: unrealized gain(7,000)Realized Income50,000NCI share* 20%Share in net income10,00031

Consolidated Net Income-200APs net income from own operations (P164,000-24,000) 140,000Ss realized net income from own operations Net income57,000 Unrealized gain (downstream sale) ( 7,000) 50,000Consolidated net income 190,000Attributable to NCI (50,000 x 20%) ( 10,000)Attributable to parent (Controlling Interest) 180,000

432

4Consolidated Retained Earnings-200ARetained earnings, December 31,200A- P 404,000Add: Ps share in undistributed adjusted income of S Undistributed Income(57,000-30,000) 27,000 Unrealized upstream sale (7,000) Realized increase in earnings 20,000 P Co.s proportionate share 80% 16,000Consolidated retained earnings, December 31,2010 420,000

Share in S adjusted net income S adjusted net income (57,000-7,000) 50,000 P Co.s proportionate share* 80% 40,000Less: Dividend received (24,000)33


Net assets (S/E), 1/1/200A S Company300,000Increase in undistributed earnings Net income 57,000 Unrealized gain ( 7,000) Dividends paid ( 30,000) 20,000Net assets, 12/31/10 S Company320,000

NCI (320,000 x 20%) 64,000NCI beg. 60,000Share in net income Net income 57,000 Unrealized gain ( 7,000) 50,000 * 20% 10,000NCI Dividend(6,000)

534Separate Company Entries 200BBooks of S CompanyDuring 200B, P will begin depreciating the P70,000 cost of the equipment purchased from S over its remaining life of seven (7) years using the straight line method. The depreciation of P10,000 per year (70,000/7 years) is recorded as follows by P:

Depreciation expense10,000Accumulated Depreciation10,000To record depreciation for 2011.

P Co. received dividend of 32,000 from S Co.

Intercompany gain on sale of depreciable assets6

1.Dividend Income 32,000NCI 8,000 Dividends declared S Co. 40,0002.NCI in net Income of S CO. 15,380 NCI 15,3803.Common Stock200,000RE100,000 Inv. In S Co. 240,000 NCI 60,0005. Machinery & Equip. 20,000 RE-P Co. 5,600 NCI1,400 Acc. Dep. 27,0004.R E-S Company Jan 1 5,400 NCI 5,400Depreciation recorded by S10,000Should be depreciation (9,000)Overstatement (realized gain) 1,0006. Acc. Dep. 1,000 Depreciation Exp. 1,00066. R.E-S 21,600 R.E -P 21,600S net Income 75,900Realized Gain 1,000Realized net income76,900NCI share *20% NCI share in net income of S 15,38036

5Consolidated Net Income-200BPs net income from own operations (P191,000-32,000) 159,000Ss realized net income from own operations Net income75,900 realized gain (downstream sale) 1,000 76,900Consolidated net income 235,900Attributable to NCI (76,900 x 20%) ( 15,380)Attributable to parent (Controlling Interest) 220,520

37

Consolidated Retained Earnings-200BConsolidated R.E. beginning 420,000Consolidated Net Income220,500Dividends declared- P. Co.( 60,000)Consolidated R.E end580,250738

7The NCI of 71,380 may be verified by the following computations:

Net assets (S/E), 1/1/200B S Company320,000Increase in undistributed earnings Net income 75,900 realized gain 1,000 Dividends paid ( 40,000) 36,900Net assets, 12/31/10 S Company356,900

NCI (356,900 x 20%) 71,380NCI beg. 64,000Share in net income Net income 75,900 realized gain 1,000) 76,900 * 20% 15,380NCI Dividend(8,000)

39

Intercompany gain on sale of depreciable assets3Observation on Upstream sale of depreciable assetUnrealized gain(loss) shall be shared between the parent and the NCI.Unrealized gain(loss) will be gradually realized through the passage of time, when the Subsidiary benefited upon the use of the asset.Realized gain(loss) is the difference between the should have been depreciation and the depreciation recorded by the parent.To eliminate unrealized gain(loss) in the subsequent period retained earnings of the parent and NCI shall be used.

40

7Intercompany Sale of Plant Assets Equity MethodBasis for consolidation:

Cost method (required by PAS 27)Equity Method (Investment in Associate)-Dividends will be recorded as a reduction to the investment account.-Share in realized net income shall be recognized.-Changes in fair value is not recognized.

41Illustration:Assume S sell equipment to P for P70, 000 on Dec. 31, 200A. The original cost and accumulated depreciation of the equipment are P90, 000 and P27, 000. The remaining life of the equipment is seven years. On Dec. 31, 200A, S reports net income of P57,000, including the P7,000 gain on sale of the equipment. Both company uses the straight-line method of depreciation. S declared dividends of 30,000. P owns 240,000 as investment in S Co. stocks.

Intercompany Sale of Plant Assets Equity MethodSeparate Company Entries 200ABooks of S Company 200A

Dec. 31, 200ADepreciation9, 000Accumulated Depreciation 9, 000To record 2010 depreciation based on original cost.

Cash70, 000Accumulated Depreciation27, 000Equipment90, 000Gain on sale of equipment7, 000To record sale of equipment.

Intercompany Sale of Plant Assets Equity MethodBooks of P Corporation

Dec. 31, 200AEquipment70, 000Cash 70, 000To record purchase of equipment.

Intercompany Sale of Plant Assets Equity MethodEquity Method Entries 200A

Cash 24, 000Investment in S Company stock24, 000To record dividends from S (P30, 000 x 80%)

Investment in S Company stock45, 600Investment income 45, 600To record equity-method income (P57, 000 x 80%)

Investment income5,600Investment in S Company stock 5, 600To remove unrealized gain on sale of equipment (P7, 000 x 80%)

Intercompany Sale of Plant Assets Equity MethodOriginal acquisition cost of S Companys stockP240, 000Ps proportionate share of Ss income (P57, 000 x 80%) 45, 600Ps s share of Ss dividends (P30, 000 x 80%) (24, 600)Ps share of unrealized gain (P7, 000 x 80%) (5, 600)Balance of investment account, De. 31, 2010 P 256, 000

Intercompany Sale of Plant Assets Equity MethodWorking Paper Elimination Entries 200A

Investment income40, 000Dividends declared24, 000Investment in S Company stock16, 000To eliminate investment income.

NCI in net income of subsidiary10, 000Dividends declared6, 000NCI 4, 000To assign income to NCI (P57, 000 P 7, 000) x 20%

Intercompany Sale of Plant Assets Equity MethodCommon stock S200, 000Retained earnings, Jan. 1 S100, 000Investment in S Company stock 240, 000NCI 6, 000To eliminate Ss equity accounts against investmentaccount and NCI at the beginning of year.

Machinery and equipment20, 000Gain on sale of equipment 7, 000Accumulated depreciation27, 000To eliminate gain on sale of equipment.

Intercompany Sale of Plant Assets Equity MethodContinuing the illustration S declared 40,000 of dividends on 200B. S earned 75,900 for the period

Equity-Method Entries 200B

Depreciation 10, 000Accumulated depreciation 10, 000To record depreciation (P70, 000/ 7 years)

Cash 32, 000Investment in S Company stock32, 000To record dividends from S (P40, 000 x 80%)

Investment in S Company stock60, 720Investment income60, 720To record equity-method income (P75, 900 x 80%)

Investment in S Company stock800Investment income800To recognize portion of gain on sale of equipment. (P1, 000 x 80%)

Intercompany Sale of Plant Assets Equity MethodWorking Paper Elimination Entries 200BInvestment income61,520Dividends declared32, 000Investment in S Company stock29, 520To eliminate investment income.

NCI in net income of subsidiary15, 380Dividends declared8, 000NCI 7,380To assign income to NCI (P75,900 + P 1, 000) x 20%

Common stock S200, 000Retained earnings, Jan. 1 S127, 000Investment in S Company stock 261,600NCI 65, 400To eliminate Ss equity accounts against investmentaccount and NCI at the beginning of year.

Intercompany Sale of Plant Assets Equity MethodMachinery and equipment20, 000Investment in S Co. stock 5, 600NCI 1,400Accumulated depreciation27, 000To eliminate unrealized gain on upstream sale.

Accumulated Depreciation1,000Depreciation Expense1,000To record excess depreciation (realized gain)

Intercompany Sale of Plant Assets Equity MethodSheet1P Co.S Co.Income StatementSales400,000200,000Gain on sale7,000Dividend Income24,000Total Revenue431,000200,000COGS170,000115,000Dep. And Amortization50,00020,000Other Expenses40,00015,000Total Cost and Expenses260,000150,000Net/Consolidated Income171,00050,000NCI in net income of S Co.Net income to RE171,00050,000Retained Earnings StatementRetained Earnings, Jan 1300,000100,000Net Income from Above171,00050,000Total471,000150,000Dividends declard-60,000-30,000Retained Earnings, Dec 31411,000120,000Statement of Financial PositionCash277,30068,000Accounts Receivable75,00050,000Inventory100,00075,000Land175,00040,000machine and Equipment791,000607,000Investment in S Company240,000Total Assets1,658,300840,000Acc. Dep447,300320,000Accounts Payable100,000100,000Bonds Payable200,000100,000Common Stock200,000200,000Retained Earnigs500,000120,000NCITotal Liablities and Equity1,658,300840,000

Sheet1P CompanyS CompanyEliminationsConsolidatedDebitCreditIncome StatementSales400,000200,000600,000Gain on sale of equipment7,000(4) 7,000Dividend income24,000(1) 24,000 Total revenue431,000200,000600,000Cost of goods sold170,000115,000285,000Depreciation and amort.50,00020,00070,000Other expenses40,00015,00055,000Total cost and expenses260,000150,000410,000Net consolidated income171,00050,000190,000NCI in net income of subsidiary(2) 10,000(10,000)Net income, to RE171,00050,000180,000

Retained Earnings StatementRetained earnings, Jan.1300,000100,000(3) 100,000300,000Net income,from above171,00050,000180,000Total471,000150,000480,000Dividends declared60,00030,000(1) 30,00060,000Retained earnings, Dec.31 to BS411,000120,000420,000

Statement of FPCash277,30068,000345,300Accounts receivable 75,00050,000125,000Inventory100,00075,000175,000Land175,00040,000215,000Machinery and equipment791,000607,000 (4) 20,0001,418,000Investment in S Co.240,000(3) 240,000-Total assets1,658,300840,0002,278,300Accumulated Depreciation447,300320,000(4) 27,000794,300Account Payable100,000100,000200,000Bonds Payable200,000100,000300,000Common Stock500,000200,000(3) 200,000500,000Retained earnings, from above411,000120,000420,000Non-controlling interest (NCI)(1) 6,000(2) 10,00064,000(3) 60,000Total Liabilities and Equity1,658,300840,000367,000367,0002,278,300







Sheet1P CompanyS CompanyEliminationsConsolidatedDebitCreditIncome StatementSales450,000300,000600,000Dividend income32,000(1) 24,000 Total revenue482,000300,000600,000Cost of goods sold180,000160,000285,000Depreciation and amort.51,00021,00070,000Other expenses60,00045,00055,000Total cost and expenses291,000226,000410,000Net consolidated income191,00074,000190,000NCI in net income of subsidiary(2) 10,000(10,000)Net income, to RE191,00074,000180,000

Retained Earnings StatementRetained earnings, Jan.1411,000120,000(3) 100,000300,000

Net income,from above191,00074,000180,000Total602,000194,000480,000Dividends declared60,00040,000(1) 30,00060,000Retained earnings, Dec.31 to BS542,000154,000420,000

Statement of FPCash302,40078,000345,300Accounts receivable 150,00080,000125,000Inventory180,00090,000175,000Land175,00040,000215,000Machinery and equipment791,000607,000 (4) 20,0001,418,000Investment in S Co.240,000(3) 240,000-Total assets1,838,400895,0002,278,300Accumulated Depreciation496,400341,000(12) 27,000794,300Account Payable100,000100,000200,000Bonds Payable200,000100,000300,000Common Stock500,000200,000(3) 200,00500,000Retained earnings, from above542,000154,000420,000Non-controlling interest (NCI)(1) 6,000(2) 10,00064,000

(3) 60,000Total Liabilities and Equity1,658,300895,000367,000367,0002,278,300

Sheet1P CompanyS CompanyEliminationsConsolidatedDebitCreditIncome StatementSales450,000300,000750,000Dividend income32,000(1) 32,000 Total revenue482,000300,000750,000Cost of goods sold180,000160,000340,000Depreciation and amort.51,00021,000(6)1,00071,000Other expenses60,00045,000105,000Total cost and expenses291,000226,000516,000Net consolidated income191,00074,000234,000NCI in net income of subsidiary(2) 14,800(14,800)Net income, to RE191,00074,000219,200

Retained Earnings StatementRetained earnings, Jan.1411,000120,000(3) 100,000420,000(4) 4,000(5)7,000Net income,from above191,00074,000219,200Total602,000194,000639,200Dividends declared60,00040,000(1) 40,00060,000Retained earnings, Dec.31 to BS542,000154,000579,200

Statement of FPCash302,40078,000380,500Accounts receivable 150,00080,000230,000Inventory180,00090,000270,000Land175,00040,000215,000Machinery and equipment791,000607,000 (5) 20,0001,418,000Investment in S Co.240,000(3) 240,000-Total assets1,838,400895,0002,513,000Accumulated Depreciation496,400341,000(6)1,000(5) 27,000863,400Account Payable100,000100,000200,000Bonds Payable200,000100,000300,000Common Stock500,000200,000(3) 200,000500,000Retained earnings, from above542,000154,000579,200Non-controlling interest (NCI)(1) 8,000(2) 14,80070,800(3) 60,000(4) 4,000Total Liabilities and Equity1,658,300895,000367,000367,0002,513,400







Sheet1P Co.S Co.Income StatementSales400,000200,000Gain on sale7,000Dividend Income24,000Total Revenue424,000207,000COGS170,000115,000Dep. And Amortization50,00020,000Other Expenses40,00015,000Total Cost and Expenses260,000150,000Net/Consolidated Income164,00057,000NCI in net income of S Co.Net income to RE164,00057,000

Retained Earnings StatementRetained Earnings, Jan 1300,000100,000Net Income from Above164,00057,000Total464,000157,000Dividends declard60,00030,000Retained Earnings, Dec 31404,000127,000

Statement of Financial PositionCash257,30088,000Accounts Receivable75,00050,000Inventory100,00075,000Land175,00040,000machine and Equipment807,000591,000Investment in S Company240,000Total Assets1,658,300844,300Acc. Dep450,000317,000Accounts Payable100,000100,000Bonds Payable200,000100,000Common Stock500,000200,000Retained Earnigs404,000127,000NCITotal Liablities and Equity1,654,000844,3001,654,000844,300












Statement of FPCash284,00098,300382,300Accounts receivable 150,00080,000230,000Inventory180,00090,000270,000Land175,00040,000215,000Machinery and equipment807,000591,000 (5) 20,0001,418,000Investment in S Co.240,000(3) 240,000-Total assets1,836,000899,3002,515,300Accumulated Depreciation501,000336,400(6)1,000(5) 27,000863,400Account Payable100,000100,000200,000Bonds Payable200,000100,000300,000Common Stock500,000200,000(3) 200,000500,000Retained earnings, from above535,000162,900580,520Non-controlling interest (NCI)(1) 8,000(2) 14,80071,380(5)1,400(3) 60,000(4) 5,400Total Liabilities and Equity1,836,000899,300388,780388,7802,515,300










Intercompany Gain Transactions – Plant Assets

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Transcript of Intercompany Gain Transactions – Plant Assets