PreBuild Manufacturing Acquired 100% of Shoding Industries Common Stock on January

question 23

Essay

PreBuild Manufacturing acquired 100% of Shoding Industries common stock on January 1, 2014, for $670,000 when the book values of Shoding's assets and liabilities were equal to their fair values and Shoding's stockholders' equity consisted of $380,000 of Capital Stock and $290,000 of Retained Earnings.
PreBuild's separate income (excluding investment income from Shoding) was $870,000, $830,000 and $960,000 in 2014, 2015 and 2016, respectively. PreBuild sold inventory to Shoding during 2014 at a gross profit of $50,000 and 50% remained at Shoding at the end of the year. The remaining 50% was sold in 2015. At the end of 2015, PreBuild has $54,000 of inventory received from Shoding from a sale of $180,000 which cost Shoding $150,000. There are no unrealized profits in the inventory of PreBuild or Shoding at the end of 2016. PreBuild uses the equity method in its separate books. Select financial information for Shoding follows:
Required:
Prepare a schedule to determine PreBuild Manufacturing's Consolidated net income for 2014, 2015, and 2016.

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Definitions:

Corn

A cereal grain primarily used as livestock feed, biofuel, and as a staple food in many parts of the world, significant in agricultural economics.

Cross-hedging

An investment strategy used to manage risk by investing in assets indirectly related to the primary exposure.

Hedging

A risk management strategy used to limit or offset the probability of loss from fluctuations in the prices of commodities, currencies, or securities.

Closely Related

Closely Related describes items, individuals, or concepts that are closely connected in terms of characteristics, functions, or relationships.