Perry Instruments International Purchased 75% of the Outstanding Common Stock

question 32

Essay

Perry Instruments International purchased 75% of the outstanding common stock of Standard Systems in 1997 when the book values and fair values of Standard's assets and liabilities were equal.The cost of Perry's investment was equal to 75% of the book value of Standard's net assets.Separate company income statements for Perry and Standard for the year ended December 31, 2011 are summarized as follows:
During 2011, the companies began to manage their inventory differently, and worked together to keep their inventories low at each location.In doing so, they agreed to sell inventory to each other as needed at a markup of 10% of cost.Perry sold merchandise that cost $100,000 to Standard for $110,000, and Standard sold inventory that cost $80,000 to Perry for $88,000.Half of this merchandise remained in each company's inventory at December 31, 2011.
Required:
Prepare a consolidated income statement for Perry Corporation and Subsidiary for 2011.

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Definitions:

Factor-Comparison Method

A technique used in job evaluation that involves comparing jobs to a series of key factors and assigning monetary values to them.

Point System

A method for evaluating or ranking options based on the allocation of points to criteria deemed important.

Compensable Factors

Elements of a job that are used to determine its value and appropriate compensation, including factors like skill level, effort, responsibility, and working conditions.

Job Evaluation

A systematic process for assessing the relative worth of jobs within an organization to establish fair compensation.