Pine Company, a Computer Manufacturer, Owns 90% of the Outstanding

question 8

Essay

Pine Company, a computer manufacturer, owns 90% of the outstanding stock of Slider Company. On January 1, 2017, Pine sold computers to Slider for $500,000. The computers, which are inventory to Pine, had a cost to Pine of $350,000. Slider Company estimated that the computers had a useful life of six years from the date of purchase.
Slider Company reported net income of $310,000, and Pine Company reported net income of $870,000 from its independent operations (including sales to affiliates) for the year ended December 31, 2017.
Required:
A. Prepare in general journal form the workpaper entries necessary because of the intercompany sales in the consolidated statements workpaper for both 2017 and 2018.
B. Calculate controlling interest in consolidated net income for 2017.

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Definitions:

Drive Theory

A psychological theory that suggests human behaviors are motivated by internal drives that seek to reduce physiological needs.

Stimulation

The act of encouraging a biological or physiological activity or response through some external input or action.

Motivation

Motivation is the internal process that activates, guides, and maintains behavior towards achieving a goal.

Homeostasis

The capacity of an organism or environment to sustain equilibrium in reaction to alterations.