Roberts Corporation and William Company (Continuing Project)
Over the next two years, William continued selling inventory to Roberts. Assume that any items in intercompany inventory at the end of a given year were sold to outside parties in the following year. Below are the details of the intercompany inventory sales:
Year Intercompany sales Intercompany ending inventory at transfer price Gross profit rate on intercompany inventory transfers
2009 $125,000 $80,000 25%
2010 $220,000 $125,000 28%
2011 $300,000 $160,000 25%
In addition to these transfers of inventory, William sold a building to Roberts on January 1, 2010, for $126,000. The book value of the building was only $70,000 on that date. The building had an eight-year remaining useful life at the time of the transfer and is depreciated using the straight-line method with no salvage method. The building remains on Robert's books as of December 31, 2011.
Separate financial statements for both companies as of December 31, 2011, are shown below:
Roberts William
Revenues $(1,740,000) $(950,000)
Cost of goods sold $820,000 $500,000
Depreciation expense $104,000 $85,000
Amortization expense $220,000 $120,000
Interest expense $20,000 $15,000
Income from Subsidiary $(129,600) 0
Net Income $(705,600) $(230,000)
Retained earnings, 1/1/09 $(2,856,000) $(487,000)
Net Income (above) $(705,600) $(230,000)
Dividends paid $200,000 $25,000
Retained earnings, 12/31/09 $(3,361,600) $(692,000)
Cash $535,000 $115,000
Accounts receivable $575,000 $215,000
Inventory $990,000 $800,000
Investment in William Stock $1,481,600 0
Buildings and equipment (net) $1,025,000 $905,000
Patents $950,000 $107,000
Total assets $5,556,600 $2,142,000
Accounts payable $(450,000) $(200,000)
Notes payable $(545,000) $(450,000)
Common stock $(900,000) $(700,000)
Additional paid-in capital $(300,000) $(100,000)
Retained earnings, 12/31/09 (above) $(3,361,600) $(692,000)
Total liabilities and stockholders' equity $(5,556,600) $(2,142,000)
Part I
Based on the information given above, complete the following tasks using the excel sheet created in Week 1:
- Prepare all of the necessary eliminating entries needed at December 31, 2011, using Microsoft Excel.
• Prepare the consolidated income statement, retained earnings statement, and balance sheet as of December 31, 2011, using Microsoft Excel. Be sure to show clearly the noncontrolling interest in both net income and stockholders' equity on your worksheet.
Submit your sheet to the W3: Assignment 4 Dropbox by Week 3, Day 5.
Name your document: SU_MBA6302_W3_A4_LastName_FirstInitial.xls.
Part II
Robert's management has recently become vaguely aware of the requirements for FASB Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information." Since both Roberts and William operate in a single industry segment, management assumes that they are not subject to the disclosure requirement of SFAS 131. Draft a one- to two-page memorandum in a Microsoft Word document to your president indicating how, if at all, SFAS 131 applies to your company. Provide succinct but complete communication and, given the nature of the audience, avoid the use of accounting jargon.
Cite any sources you use using the correct APA format on a separate page.
Submit your memorandum to the Discussion Area by Week 3, Day 6.
Zip all the files and name your folder: SU_MBA6302_W3_A4_LastName_FirstInitial.zip.
Comment on the memorandum of at least one of your peers from the perspective of a supervisor or colleague. Provide feedback to the peer with respect to the brevity, clarity, and use of appropriate language in the memorandum.
Assignment 4 Grading Criteria Maximum Points
Prepared all of the necessary eliminating entries needed at December 31, 2011. 10
Prepared the consolidated income statement, retained earnings statement, and balance sheet as of December 31, 2011, using Microsoft Excel, clearly indicating the noncontrolling interest in both net income and stockholders' equity on your worksheet. 20
Created a one- to two-page memorandum indicating how, if at all, SFAS 131 applies to Roberts Corporation. 15
Avoided the use of accounting jargon. 5
Used correct spelling and grammar. Cited all sources using the correct APA style. 5
Commented on the memorandum of at least one of your peers from the perspective of a supervisor or colleague. 10
Total: 65
For assistance with any problems you may have when completing this assignment-OR-to offer your assistance to classmates, please use the Problems and Solutions Discussion area located