a. How was the income from subsidiary calculated by Penguin Company? What is the income attributable to NCI and how was it calculated?b. Do a proof of the investment account and NCI account at 12/31/18 and 12/31/19. I am looking for you to tell me what comprises the balance in these accounts (BV Sub Equity + ....). Note: You have all the information you would need to calculate both beginning and ending investment balances! Do not do a rollforward where you start with 12/31/18 and then put in current year activity to get the 12/31/19 balance. That is not what I mean by proof. Use this method to check your answer:)c. Prepare the entries required under the equity method on Penguin's pre-consolidation books for 2019.d. Prepare the consolidation entries for 2019. Every CEADI entry is required to do this consolidation.e. Prepare the consolidation spreadsheet. What is provided in the Excel document is the same as the information provided above. Add or delete rows if necessary to accommodate your solution/consolidation entries.
Comprehensive Consolidation Problem – Version 2 Penguin purchased 70% of Star on January 1, 2016 for $2,200,000. The FV of the noncontrolling interests at the acquisition date was 850,000. The book value of Star’s equity was $2,300,000 at the time. Penguin uses the equity method to account for its investment in Star. The excess of investment cost over book value was allocated as follows: Equipment (25-year life)$150,000 Customer list (5-year life) 184,000 Patent (10-year life) 166,000 Goodwill 250,000 Total$750,000 Star regularly sells inventory to Penguin. Penguin includes that inventory in the products that it ultimately sells to customers outside of the consolidated group. The following table shows the inventory sales information for the years ending 2018 and 2019: 2018 2019 Transfer price for inventory sale $50,100 $87,400 Cost of goods sold (31,900) (58,700) Gross profit deferred $18,200 $28,700 EOY Receivable/Payable $25,000 $40,000 Any amounts unsold at the end of the year are sold in the following year. On January 2, 2017, Penguin sold equipment to Star for $80,000. The equipment had a cost of $100,000 and accumulated depreciation of $45,000. The remaining life of the equipment was estimated at 5 years. Financial statements of Penguin and Star for the year ended December 31, 2019 are presented below. Income Statement Penguin Star Sales $5,706,000 $1,833,500 Cost of goods sold (4,003,800) (1,110,650) Gross Profit 1,702,200 722,850 Income (loss) from subsidiary 208,805 Operating expenses (931,020) (361,800) Net income $ 979,985 $ 361,050 Statement of Retained Earnings Penguin Star BOY Retained Earnings $3,167,755 $980,010 Net income 979,985 361,050 Dividends (154,690) (42,520) EOY Retained Earnings $3,993,050 $1,298,540 Balance Sheet Penguin Star Assets: Cash $ 1,962,802 $ 1,042,340 Inventory 1,158,650 690,270 Equity Investment 1,592,648 PPE, net 5,358,920 1,327,490 Total Assets $10,073,020 $3,060,100 Liabilities and Stockholders’ Equity: Accounts payable $ 708,300 $ 311,210 Accrued liabilities 803,130 370,650 Notes payable 2,940,000 665,300 Common Stock 860,940 183,950 APIC 767,600 230,450 Retained Earnings 3,993,050 1,298,540 Total Liab and Stockholders’ Equity $10,073,020 $3,060,100 a. How was the income from subsidiary calculated by Penguin Company? What is the income attributable to NCI and how was it calculated? b. Do a proof of the investment account and NCI account at 12/31/18 and 12/31/19. I am looking for you to tell me what comprises the balance in these accounts (BV Sub Equity + ….). Note: You have all the information you would need to calculate both beginning and ending investment balances! Do not do a rollforward where you start with 12/31/18 and then put in current year activity to get the 12/31/19 balance. That is not what I mean by proof. Use this method to check your answer:) c. Prepare the entries required under the equity method on Penguin's pre-consolidation books for 2019. d.Prepare the consolidation entries for 2019. Every CEADI entry is required to do this consolidation. e. Prepare the consolidation spreadsheet. What is provided in the Excel document is the same as the information provided above. Add or delete rows if necessary to accommodate your solution/consolidation entries.