Question

The following are several figures reported for Allister and Barone as of December 31, 2018.

Answer 1

Answer:

1) INVENTORY =  $540,000 +$340,000 - (188000*0.15*40.30%/140.30%)

                        = $880,000- $1800 = $878200

2 Sales =$1,080,000 + $880,000 -$188,000= $1,772,000

3) Cost of goods sold =540000+440000-188000+1800 =$793800

4) Operating expenses = 250000+320000+ 12800 = $582,800

5) Net income attributable to NCI = $10,540

Explanation:

In the closing there is an unrealised profit of(188000*15%) = $28200 * 40.30%/140.30% =$8100

to get the mark up of 40.30% We take [(188000-134000)/134000]*100

Amortisation = 64000/5 =12800

5) Calculations

Non Controlling Interest( NCI) has an attributable profit only from the profits made by the subsidiary (Barone) therefore we need to calculate the profit of Barone separately as NCI is the remaining 10% in Barone

(880000-440000-320000-12800) = $107,200-1800 = $105400*0.1= $10540

Answer 2

Answer:

Inventory                     871,900‬

Sales                         1,772,000

COGS                           800,100‬

Operating expenses  582,800

NCI                                    9,910‬

Explanation:

As there inventory is sold upstream we deduct the unsold amount

Inventory:

540,000 + 340,000 = 880,000

134,000 x 15% =  20,100 historic cost

188,000 x 15% = 28,200 value of the inventory in the parent company

we eliminate the gross profit against inventory

28,200 - 20,100 = 8,100

880,000 - 8,100 = 871.900‬

Sales

1,080,000 + 880,000 = 1.960.000‬

we deduct the 188,000 intra-entity sale from subsidiary to parent

the portion sold to third parties is given in the parent sales figure so we eliminate this to abvoid counting the same good twice:

1,960,000 - 188,000 = 1,772,000

The COGS should be for the subsidiary amount only

540,000  +  440,000 = 980,000

we subtract the 188,000 x 85% COGS of the parent when selling the goods of the subsidiary: 159,800

And from the subsidiary there is also a 15% of their COGS which should be elimanate as it didn't ended in a non-affiliate (is in the parent inventory)

134,000 x 15% = 20,100

COGS 980,000 - 159,800 - 20,100 = 800.100‬

Operating expenses 250,000 320,000  = 570,000

we also add up the amortization of Barone intangible asset

64,000 / 5 = 12,800

total expenses 582,800

Non controlling income: (10% of Barone)

We calculate the subsidiary income

880,000  - 440,000 - 332,800 =  107,200 we calculate 10% of this:

10,720

Then, we subtract the percentage of their income in the non-realized gain (sale to parent company)

8,100 x 10% = 810

Non controlling income 10,720 - 810 = 9.910‬