Accounting does this first question look right, I don’t feel very good

| January 30, 2017

Question
Upstream and Downstream Sales
Pace Company owns 85% of the outstanding common stock of Sand Company and all the
outstanding common stock of Star Company. During 2012, the affiliates engaged in intercompany
sales as follows:
Sales of Merchandise
Pace to Sand $ 40,000
Sand to Pace 60,000
Sand to Star 75,000
Star to Pace 50,000
$225,000
The following amounts of intercompany profits were included in the December 31,
2011, and December 31, 2012, inventories of the individual companies:
Intercompany Profit in
December 31, 2011, Inventory of
Selling Company Pace Sand Star Total
Pace Company $7,000 $ 7,000
Sand Company $ 5,000 $3,000 8,000
Star Company 8,000 8,000
Total $13,000 $7,000 $3,000 $23,000
Intercompany Profit in
December 31, 2012, Inventory of
Selling Company Pace Sand Star Total
Pace Company $2,000 $ 2,000
Sand Company $ 6,000 $9,000 15,000
Star Company 4,000 4,000
Total $10,000 $2,000 $9,000 $21,000
Income from each company’s independent operations (including sales to affiliates) for
the year ended December 31, 2012, is presented here:
Pace Company $200,000
Sand Company 150,000
Star Company 125,000
Required:
A. Prepare in general journal form the workpaper entries necessary to eliminate intercompany
sales and intercompany profit in the December 31, 2012, consolidated financial
statements workpaper.
2011
Sales $ 436,000.00
Purchases (Cost of Goods Sold) $ 436,000.00
12/31 Inventory (Income Statement) $ 18,167.00
Inventory (Balance Sheet) $ 18,166.67
2012
Sales $ 532,000.00
Purchases (Cost of Goods Sold) $ 532,000.00
Beginning Retained Earnings $ 16,350.30
Noncontrolling Interest $ 1,816.70
1/1 Inventory (Income Statement) $ 18,167.00
12/31 Inventory (Income Statement) $ 22,167.00
Inventory (Balance Sheet) $ 22,166.67
B. Calculate the balance to be reported in the consolidated income statement for the
following line items:
Consolidated income
Noncontrolling interest in consolidated income
Controlling interest in consolidated income
Reported subsidiary income
$ 130,000.00
Add: Realized profit in beginning inventory $ 18,167.00
Less: Unrealized profit in ending inventory $ (22,167.00)
Subsidiary income included in consolidated income $ 126,000.00
Noncontrollong interest ownership percentage 10%
Noncontrolling interest in consolidated income $12,600
net income from independent operations $ 300,000.00
Reported income $ 130,000.00
Less: Unrealized profit on intercompany sales of 2012 $ (22,167.00)
Add: Profit on 2011 sales realized in transactions
with third parties $ 18,167.00
Subsidiary income realized in transactions with third parties $ 126,000.00
share of subsidiary income $ 113,400.00
Controlling interest in consolidated net income $ 413,400.00

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