Pittle Corporation Acquired a 80% Interest in Seel Corporation at a Cost

question 25

Essay

Pittle Corporation acquired a 80% interest in Seel Corporation at a cost equal to 80% of the book value of Seel's net assets several years ago.At the time of purchase,the fair value and book value of Seel's assets and liabilities were equal.Pittle purchases its entire inventory from Seel at 150% of Seel's cost.During 2014,Seel sold $490,000 of merchandise to Pittle.Pittle's beginning and ending inventories for 2014 were $72,000 and $66,000,respectively.Income statement information for both companies for 2014 is as follows:
Required:
Prepare a consolidated income statement for Pittle Corporation and Subsidiary for 2014.

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Definitions:

Plantwide Predetermined Overhead

An overhead rate calculated for an entire manufacturing plant, applied to all products regardless of the specific department in which they were produced.

Machine-Hours

A measure of production activity that quantifies the number of hours machines are operated in the manufacturing process.

Mark Up

The percentage added to the cost price of goods to cover overhead and profit.

Direct Labor-Hours

This refers to the total number of hours worked by employees who are directly involved in the production of goods or services.