Pinta Company Owns 90% of the Common Stock of Simplex

question 39

Essay

Pinta Company owns 90% of the common stock of Simplex Company.Simplex Company sells merchandise to Pinta Company at 25% above cost.During 2013 and 2014 such sales amounted to $800,000 and $1,020,000, respectively.At the end of each year, Pinta Company had in its inventory one-fourth of the amount of goods purchased from Simplex Company during that year.Pinta Company reported income of $1,500,000 from its independent operations in 2013 and $1,720,000 in 2014.Simplex Company reported net income of $600,000 in each year and did not declare any dividends in either year.There were no intercompany sales prior to 2013.
Required:
A.Prepare, in general journal form, all entries necessary on the 2014 consolidated statements workpaper to eliminate the effects of intercompany sales.
B.Calculate the amount of noncontrolling interest to be deducted from consolidated income in the consolidated income statement in 2014.
C.Calculate controlling interest in consolidated net income for 2014.

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Definitions:

Cohort Study

An observational study type that follows a group of people (cohort) over time to investigate how certain variables may affect certain outcomes.

Retrospective Study

A research design that examines past data or events to find patterns or outcomes.

Prospective Study

A research design that follows subjects forward in time to examine the effects of certain variables on future outcomes.

Stressor

Any external or internal factor that causes stress in an individual, challenging their ability to cope.