Pitino acquired 90 percent of Brey’s outstanding shares on January 1, 2016, in exchange for $342,000 in cash. The subsidiary’s stockholders’ equity accounts totaled $326,000 and the noncontrolling interest had

Pitino acquired 90 percent of Brey’s outstanding shares on January 1, 2016, in exchange for $342,000 in cash. The subsidiary’s stockholders’ equity accounts totaled $326,000 and the noncontrolling interest had a fair value of $38,000 on that day. However, a building (with a nine-year remaining life) in Brey’s accounting records was undervalued by $18,000. Pitino assigned the rest of the excess fair value over book value to Brey’s patented technology (six-year remaining life). Brey reported net income from its own operations of $64,000 in 2016 and $80,000 in 2017. Brey declared dividends of $19,000 in 2016 and $23,000 in 2017. Brey sells inventory to Pitino as follows: At December 31, 2018, Pitino owes Brey $16,000 for inventory acquired during the period. The following separate account balances are for these two companies for December 31, 2018, and the year then ended. Credits are indicated by parentheses. Answer each of the following questions: a. was the annual amortization resulting from the acquisition-date fair-value allocations? b. Were the intra-entity transfers upstream or downstream? c. intra-entity gross profit in inventory existed as of January 1, 2018? d. intra-entity gross profit in inventory existed as of December 31, 2018? e. amounts make up the $68,400 Equity Earnings of Brey account balance for 2018? f. is the net income attributable to the noncontrolling interest for 2018? g. amounts make up the $450,000 Investment in Brey account balance as of December 31, 2018? h. Prepare the 2018 worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances. i. Without preparing a worksheet or consolidation entries, determine the consolidation balances for these two companies. Transcribed Image Text: Transfer Price
to Pitino
Inventory Remalning
at Year-End
(at transfer price)
Year
Cost to Brey
2016
$69,000
$115,000
$25,000
37,500
50,000
2017
81,000
160,000
92,800 Transcribed Image Text: Pitino
Brey
Sales revenues
Cost of goods sold
Expenses…..
Equity in earnings of Brey
$ (862,000)
515,000
$(366,000)
209,000
185,400
67,000
(68,400)
-0-
$ (230,000)
$ (488,000)
(230,000)
136,000
Net income
$ (90,000)
Retained earnings, 1/1/18
Net income (above)
Dividends declared
$(278,000)
(90,000)
27,000
$(341,000)
$ (582,000)
$ 146,000
255,000
450,000
964,000
$ 1,815,000
$ (718,000)
(515,000)
(582,000)
$(1,815,000)
Retained earnings, 12/31/18
Cash and receivables
Inventory …
Investment in Brey …
Land, buildings, and equipment (net)
$ 98,000
136,000
-0-
328,000
$ 562,000
$ (71,000)
(150,000)
(341,000)
$(562,000)
Total assets
Liabilities
Common stock
Retained earnings, 12/31/18
Total liabilities and equities.

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