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EXERCISE 4-3 Source of income components

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EXERCISE 4-3
Source of income components:
Consolidated
Income
Van Nick Eliminations Statement
Sales........................................................ (220,000) (120,000) (IS) 70,000 (270,000)
Cost of goods sold................................... 150,000 90,000 (IS) (70,000)
(BI) (3,750)
(EI) 5,000 171,250
Other income........................................... (5,000) (S) 5,000
Other expenses........................................ 40,000 12,000 (S) (5,000) 47,000
Consolidated net income......................... (51,750)
Distributed to NCI..................................... 3,350
Distributed to controlling interest............. (48,400)
Eliminations and Adjustments:
(IS) Elimination of intercompany sales.
(BI) Elimination of 25% profit from beginning inventory; debit would be to Retained Earnings;
allocated 80% to the controlling interest and 20% to the NCI.
(EI) Elimination of 25% profit from ending inventory; credit would be to inventory account.
(S) Elimination of consulting services transaction.
Note: The above format and presentation is not to be expected of the student. All that is
required is the final consolidated income statement and its distribution to controlling and
noncontrolling interests. This format is presented to aid explanation of the exercise as it
shows the sources of the numbers that determine the income statement. This form will
be used for future exercises and problems to aid the instructor.
Subsidiary Nick Company Income Distribution
Unrealized ending inventory Internally generated net
..........................................profit (EI)
.......................................$5,000
.........................................income
.......................................$18,000
Realized beginning inventory
.............................................profit (BI)
............................................3,750
Adjusted income.......................... $16,750
NCI share.................................... × 20%
NCI.............................................. $ 3,350
Parent Van Corporation Income Distribution
Internally generated net
income...................................... $35,000
80% × Nick adjusted income
of $16,750................................. 13,400

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EXERCISE 4-3 Source of income components: Consolidated Income Van Nick Eliminations Statement Sales (220,000) (120,000) (IS) 70,000 (270,000) Cost of goods sold 150,000 90,000 (IS) (70,000) (BI) (3,750) (EI) 5,000 171,250 Other income (5,000) (S) 5,000 Other expenses 40,000 12,000 (S) (5,000) 47,000 Consolidated net income (51,750) Distributed to NCI 3,350 Distributed to controlling interest (48,400) Eliminations and Adjustments: (IS) Elimination of intercompany sales. (BI) Elimination of 25% profit from beginning inventory; debit would be to Retained Ea ...
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