Company P purchased an 80% interest (8,000 shares) in Company S for $800,000 on January 1, 20X1. Company S’s equity on that date was $900,000. Any excess of cost over book value was attributed to equipment with a 10-year life. On January 1, 20X5, Company S’s equity was $1,200,000. Company S earned $200,000, evenly, during 20X5. In December of 20X5, Company S paid $10,000 in dividends. Company P had internally generated net income of $150,000. On July 1, 20X5, there was a sale of Company S stock, for $150 per share, to outside interests by Company P. For each of the situations below:

a. How will the sale be recorded?

b. Will consolidated statements be prepared for 20X5? If so, what will be consolidated net income and what will be the distribution to the NCIs?

c. If consolidated statements will not be prepared, what will be reported by the parent for its income from Company S?

Company P sells all 8,000 shares.

Company P sells 2,000 shares.

Company P sells 6,000 shares.

AppendixLO1