Problem 7-28 (Static) (LO 7-5, 7-6) Parson Company acquired an 80 percent interest in Syber Company on January 1, 2020. Any portion of Syber's business fair value in excess of its corresponding book value was assigned to trademarks. This intangible asset has subsequently undergone annual amortization based on a 15-year life. Over the past two years, regular intra-entity inventory sales transpired between the two companies. No payment has yet been made on the latest transfer. All dividends are paid in the same period as declared. The individual financial statements for the two companies as well as consolidated totals for 2021 follow (credit balances indicated by parentheses): Parson Company Syber Company Consolidated Totals Sales $ (800,000 ) $ (600,000 ) $ (1,280,000 ) Cost of goods sold 500,000 400,000 784,000 Operating expenses 100,000 100,000 202,500 Income of Syber (74,800 ) 0 0 Separate company net income $ (274,800 ) $ (100,000 ) Consolidated net income $ (293,500 ) Net income attributable to noncontrolling interest 18,700 Net income attributable to Parson Company $ (274,800 ) Retained earnings, 1/1/21 $ (611,600 ) $ (290,000 ) $ (611,600 ) Net income (above) (274,800 ) (100,000 ) (274,800 ) Dividends declared 70,000 30,000 70,000 Retained earnings, 12/31/21 $ (816,400 ) $ (360,000 ) $ (816,400 ) Cash and receivables $ 298,000 $ 80,000 $ 358,000 Inventory 190,000 160,000 338,000 Investment in Syber Company 368,400 0 0 Land, buildings, and equipment 380,000 260,000 640,000 Trademarks 0 0 32,500 Total assets $ 1,236,400 $ 500,000 $ 1,368,500 Liabilities $ (270,000 ) $ (60,000 ) $ (310,000 ) Common stock (120,000 ) (80,000 ) (120,000 ) Additional paid-in capital (30,000 ) 0 (30,000 ) Noncontrolling interest in Syber 0 0 (92,100 ) Retained earnings (above) (816,400 ) (360,000 ) (816,400 ) Total liabilities and equities $ (1,236,400 ) $ (500,000 ) $ (1,368,500 ) What method does Parson use to account for its investment in Syber? What is the balance of the intra-entity inventory gross profit deferred at the end of the current period? What amount was originally allocated to the trademarks? What is the amount of the current-year intra-entity inventory sales? Were the intra-entity inventory sales made upstream or downstream? What is the balance of the intra-entity liability at the end of the current year? What amount of intra-entity gross profit was deferred from the preceding period and recognized in the current period? What was the ending Noncontrolling Interest in Syber Company computed? With a tax rate of 21 percent, what income tax journal entry is recorded if the companies prepare a consolidated tax return? With a tax rate of 21 percent, what income tax journal entry is recorded if these two companies prepare separate tax returns?

Problem 7-28 (Static) (LO 7-5, 7-6) Parson Company acquired an 80 percent interest in Syber Company on January 1, 2020. Any portion of Syber's business fair value in excess of its corresponding book value was assigned to trademarks. This intangible asset has subsequently undergone annual amortization based on a 15-year life. Over the past two years, regular intra-entity inventory sales transpired between the two companies. No payment has yet been made on the latest transfer. All dividends are paid in the same period as declared. The individual financial statements for the two companies as well as consolidated totals for 2021 follow (credit balances indicated by parentheses): Parson Company Syber Company Consolidated Totals Sales $ (800,000 ) $ (600,000 ) $ (1,280,000 ) Cost of goods sold 500,000 400,000 784,000 Operating expenses 100,000 100,000 202,500 Income of Syber (74,800 ) 0 0 Separate company net income $ (274,800 ) $ (100,000 ) Consolidated net income $ (293,500 ) Net income attributable to noncontrolling interest 18,700 Net income attributable to Parson Company $ (274,800 ) Retained earnings, 1/1/21 $ (611,600 ) $ (290,000 ) $ (611,600 ) Net income (above) (274,800 ) (100,000 ) (274,800 ) Dividends declared 70,000 30,000 70,000 Retained earnings, 12/31/21 $ (816,400 ) $ (360,000 ) $ (816,400 ) Cash and receivables $ 298,000 $ 80,000 $ 358,000 Inventory 190,000 160,000 338,000 Investment in Syber Company 368,400 0 0 Land, buildings, and equipment 380,000 260,000 640,000 Trademarks 0 0 32,500 Total assets $ 1,236,400 $ 500,000 $ 1,368,500 Liabilities $ (270,000 ) $ (60,000 ) $ (310,000 ) Common stock (120,000 ) (80,000 ) (120,000 ) Additional paid-in capital (30,000 ) 0 (30,000 ) Noncontrolling interest in Syber 0 0 (92,100 ) Retained earnings (above) (816,400 ) (360,000 ) (816,400 ) Total liabilities and equities $ (1,236,400 ) $ (500,000 ) $ (1,368,500 ) What method does Parson use to account for its investment in Syber? What is the balance of the intra-entity inventory gross profit deferred at the end of the current period? What amount was originally allocated to the trademarks? What is the amount of the current-year intra-entity inventory sales? Were the intra-entity inventory sales made upstream or downstream? What is the balance of the intra-entity liability at the end of the current year? What amount of intra-entity gross profit was deferred from the preceding period and recognized in the current period? What was the ending Noncontrolling Interest in Syber Company computed? With a tax rate of 21 percent, what income tax journal entry is recorded if the companies prepare a consolidated tax return? With a tax rate of 21 percent, what income tax journal entry is recorded if these two companies prepare separate tax returns?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 11P

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Problem 7-28 (Static) (LO 7-5, 7-6)

Parson Company acquired an 80 percent interest in Syber Company on January 1, 2020. Any portion of Syber's business fair value in excess of its corresponding book value was assigned to trademarks. This intangible asset has subsequently undergone annual amortization based on a 15-year life. Over the past two years, regular intra-entity inventory sales transpired between the two companies. No payment has yet been made on the latest transfer. All dividends are paid in the same period as declared.

The individual financial statements for the two companies as well as consolidated totals for 2021 follow (credit balances indicated by parentheses):

	Parson Company		Syber Company	Consolidated Totals
Sales	$	(800,000	)	$	(600,000	)	$	(1,280,000	)
Cost of goods sold		500,000			400,000			784,000
Operating expenses		100,000			100,000			202,500
Income of Syber		(74,800	)		0			0
Separate company net income	$	(274,800	)	$	(100,000	)
Consolidated net income							$	(293,500	)
Net income attributable to noncontrolling interest								18,700
Net income attributable to Parson Company							$	(274,800	)
Retained earnings, 1/1/21	$	(611,600	)	$	(290,000	)	$	(611,600	)
Net income (above)		(274,800	)		(100,000	)		(274,800	)
Dividends declared		70,000			30,000			70,000
Retained earnings, 12/31/21	$	(816,400	)	$	(360,000	)	$	(816,400	)
Cash and receivables	$	298,000		$	80,000		$	358,000
Inventory		190,000			160,000			338,000
Investment in Syber Company		368,400			0			0
Land, buildings, and equipment		380,000			260,000			640,000
Trademarks		0			0			32,500
Total assets	$	1,236,400		$	500,000		$	1,368,500
Liabilities	$	(270,000	)	$	(60,000	)	$	(310,000	)
Common stock		(120,000	)		(80,000	)		(120,000	)
Additional paid-in capital		(30,000	)		0			(30,000	)
Noncontrolling interest in Syber		0			0			(92,100	)
Retained earnings (above)		(816,400	)		(360,000	)		(816,400	)
Total liabilities and equities	$	(1,236,400	)	$	(500,000	)	$	(1,368,500	)

What method does Parson use to account for its investment in Syber?
What is the balance of the intra-entity inventory gross profit deferred at the end of the current period?
What amount was originally allocated to the trademarks?
What is the amount of the current-year intra-entity inventory sales?
Were the intra-entity inventory sales made upstream or downstream?
What is the balance of the intra-entity liability at the end of the current year?
What amount of intra-entity gross profit was deferred from the preceding period and recognized in the current period?
What was the ending Noncontrolling Interest in Syber Company computed?
With a tax rate of 21 percent, what income tax journal entry is recorded if the companies prepare a consolidated tax return?
With a tax rate of 21 percent, what income tax journal entry is recorded if these two companies prepare separate tax returns?

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