Preen Corporation Acquired a 60% Interest in Shino Corporation at a Cost

question 11

Essay

Preen Corporation acquired a 60% interest in Shino Corporation at a cost equal to 60% of the book value of Shino's net assets in 2010.At the time of acquisition,the book value and fair value of Shino's assets and liabilities were equal.During 2011,Preen sold $120,000 of merchandise to Shino.All intercompany sales are made at 150% of Preen's cost.Shino's beginning and ending inventories resulting from intercompany sales for 2011 were $60,000 and $36,000,respectively.Income statement information for both companies for 2011 is as follows:
Required:
Prepare a consolidated income statement for Preen Corporation and Subsidiary for 2011.

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Definitions:

Additional Paid-in Capital

The amount of capital from the issuance of shares that is more than the par value of the shares, reflecting the excess paid by investors above the nominal value.

Deferred Compensation

A portion of an employee's income that is paid out at a later date, often used as a retirement benefit.

Grant Date

The specific date on which stock options or grants are awarded to an employee under a stock option plan.

Fair Value Method

The Fair Value Method is an accounting approach that measures and reports assets and liabilities at their fair value or the price they would receive in a current market transaction.