Pot Company owns controlling interests in San and Tay Corporations, having acquired an 80 percent...

Question

Pot Company owns controlling interests in San and Tay Corporations, having acquired an 80 percent interest in San in 2011, and a 90 percent interest in Tay on January 1, 2012. Pot’s investments in San and Tay were at book value equal to fair value. Inventories of the affiliated companies at December 31, 2012, and December 31, 2013, were as follows:

Pot sells to San at a 25 percent markup based on cost, and Tay sells to Pot at a 20 percent markup based on cost. Pot’s beginning and ending inventories for 2013 consisted of 40 percent and 50 percent, respectively, of goods acquired from Tay. All of San’s inventories consisted of merchandise acquired from Pot.
REQUIRED
1. Calculate the inventory that should appear in the December 31, 2012, consolidated balance sheet.
2. Calculate the inventory that should appear in the December 31, 2013, consolidated balancesheet.

David · Accepted Answer

In the given case, POT Company limited holds 80% stake in SAN Company limited and 90% 
stake in Tay Company limited. Being the substantial shake in both the companies are held by 
PT Company limited, at year end consolidated financial statement will be prepared.  
Share held by SAN Company Limited TAY Company Limited 
POT Company 
Limited 80% 90%
Inventory Dec 31, 2012 Dec 31, 2013 
POT Company 
Limited         1,20,000          1,08,000  
SAN Company 
Limited            77,500             62,500  
TAY Company 
Limited            48,000             72,

Pot Company owns controlling interests in San and Tay Corporations, having acquired an 80 percent interest in San in 2011, and a 90 percent interest in Tay on January 1, 2012. Pot’s investments in San...

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