On December 31, 20X3, Plummer Company acquired 70% (7,000 common shares) of Summer Company for $950,000. On the acquisition date, all of the identifiable assets and liabilities of Summer had fair values that were equal to their carrying values except for the equipment, which had a fair value of $200,000 more than its carrying value and a remaining useful life of 10 years. The only other fair value increment adjustment relates to consolidated of $40,000. There has been no impairment of since the date of acquisition. Plummer uses the cost method to record its investment in Summer. The following financial information is available about the two companies.
During 20X4, Plummer sold merchandise inventory to Summer for $72,000. On December 31, 20X4, a portion of inventory remained unsold. An unrealized profit of $15,000 remained in this .
On January 1, 20X5, Plummer sold 1,000 of its shares of Summer for $150,000.
Required
a. Determine consolidated net income for the year ended December 31, 20X4.
b. Determine how the sale of the 1,000 shares of Summer by Plummer in 20X5 should be reported.
c. Determine consolidated retained earnings at December 31, 20X5.
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