Several Years Ago Polar Inc

question 119

Essay

Several years ago Polar Inc. acquired an 80% interest in Icecap Co. The book values of Icecap's asset and liability accounts at that time were considered to be equal to their fair values. Polar's acquisition value corresponded to the underlying book value of Icecap so that no allocations or goodwill resulted from the transaction.
The following selected account balances were from the individual financial records of these two companies as of December 31, 2011:
Polar sold a building to Icecap on January 1, 2010 for $112,000, although the book value of this asset was only $70,000 on that date. The building had a five-year remaining useful life and was to be depreciated using the straight-line method with no salvage value.
Required:
For the consolidated financial statements for 2011, determine the balances that would appear for the following accounts: (1) Buildings (net), (2) Operating expenses, and (3) Non-controlling Interest in Subsidiary's Net Income.

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Definitions:

Inflation Rate

The speed at which the overall price level of goods and services increases, leading to a decrease in purchasing power.

Nominal Interest Rate

The interest rate expressed in terms of annual amounts currently charged for interest and not adjusted for inflation.

Real Interest Rate

The interest rate expressed in dollars of constant value (adjusted for inflation) and equal to the nominal interest rate minus the expected rate of inflation.

Interest

The cost of borrowing money or the return earned on investments, typically expressed as a percentage.