exercises 1 penguin corporation acquired a 60 interest in squid corporation on janua 4307692

Exercises

1) Penguin Corporation acquired a 60% interest in Squid Corporation on January 1, 2012, at a cost equal to 60% of the book value of Squid's net assets.  At the time of the acquisition, the book values of Squid's assets and liabilities were equal to the fair values. Squid reports net income of $880,000 for 2012. Penguin regularly sells merchandise to Squid at 120% of Penguin's cost. The intercompany sales information for 2012 is as follows:

Intercompany sales at selling price $672,000

Sales value of merchandise unsold by Squid$132,000

Required:

1.  Determine the unrealized profit in Squid's inventory at December 31, 2012.

2.  Compute Penquin's income from Squid for 2012.

2) Salli Corporation regularly purchases merchandise from their 90%-owner, Playtime Corporation.  Playtime purchased the 90% interest at a cost equal to 90% of the book value of Salli's net assets.  At the time of acquisition, the book values and fair values of Salli's assets and liabilities were equal. Playtime makes their sales to Salli at 120% of cost. In 2012, Salli reported net income of $460,000, and made purchases totaling $172,000 from Playtime. Although Salli had no inventory on hand at the beginning of 2012 that they had purchased from Playtime, at year end, they had $51,600 of this merchandise in inventory.

Required:

1.Determine the unrealized profit in Salli's inventory at December 31, 2012.

2.Compute Playtime's income from Salli for 2012.