Puma Company Owns 80% of the Common Stock of Smarte

question 16

Essay

Puma Company owns 80% of the common stock of Smarte Company. Puma sells merchandise to Smarte at 20% above cost. During 2017 and 2018, intercompany sales amounted to $1,080,000 and $1,200,000 respectively. At the end of 2017, Smarte had one-fifth of the goods purchased that year from Puma in its ending inventory. Smarte's 2018 ending inventory contained one-fourth of that year's purchases from Puma. There were no intercompany sales prior to 2017.
Puma reported net income from its own operations of $720,000 in 2017 and $760,000 in 2018. Smarte reported net income of $400,000 in 2017 and $460,000 in 2018. Neither company declared dividends in either year.
Required:
A. Prepare in general journal form all entries necessary on the consolidated statements workpapers to eliminate the effects of the intercompany sales for both 2017 and 2018.
B. Calculate controlling interest in consolidated net income for 2018.

Discuss the rational decision-making model and how it can be violated or adhered to.

Understand the role of emotion and mood in promoting certain types of decision-making strategies.

Comprehend the mechanisms and approaches to prevent escalation of commitment to failing projects.

Recognize the factors that contribute to poor decision making, including stress and group dynamics.

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Definitions:

Monthly Profit

The financial gain or loss realized from business operations and transactions over the course of a month.

Nonbinding Constraint

A constraint in an optimization problem that does not impact the feasible region of the solution because the optimal solution lies elsewhere.

Cell Value

In the context of spreadsheets or data tables, it refers to the content or numerical figure contained within a single cell.

Constraint

A limitation or restriction on the variables in a mathematical model or optimization problem.