Ace Mining Company (the parent) acquired 100% of the common stock of Alberta Development (the subsidiary) for $300,000 on January 2, 20X1. Their financial statements follow:

1. What would be Ace Mining’s net income for 20X1 if it had not purchased the Alberta Development stock?

2. After acquiring the Alberta Development stock, Ace Mining prepared its income statement by showing its claim to Alberta’s income as part of “other income.” Prepare a consolidated income statement for 20X1 and a consolidated balance sheet as of December 31, 20X1. Use the balance- sheet-equation format for the latter.

3. Suppose Ace Mining Company bought only 60% of Alberta Development Company for $180,000.

Therefore, Ace Mining’s revenue and other income for 20X1 is $5,420,000, not $5,500,000.

Prepare a consolidated income statement and a consolidated balance sheet. Use the balance-sheet-equation format for the latter.

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Ace Mining (Parent) Alberta Development (Subsidiary) Balance sheets, December 31, 20X0 Assets Liabilities to creditors Stockholders' equity Total liabilities and stockholders' equity Income statement for 20X1 Revenue and "other income Expenses Net income $1,000,000 S 400,000 600,000 $1,000,000 550,000 250,000 300,000 550,000 $5,500,000 5,050,000 $ 450,000 $1,100,000 900,000 $200,000