Question
A parent acquires the voting stock of a subsidiary on January 1, 2019. Required revaluations of the subsidiary's net assets are: * Previously unreported identifiable
A parent acquires the voting stock of a subsidiary on January 1, 2019. Required revaluations of the subsidiary's net assets are:
| * | Previously unreported identifiable intangibles valued at $3 million, with a remaining life of 10 years, straight-line |
| * | Goodwill |
It is now December 31, 2021, three years after the acquisition. The goodwill is unimpaired during this period. The parent reports its investment in the subsidiary using the cost method. The subsidiary reports the following net income, other comprehensive income, and dividends in the three years since the acquisition:
|
| Net Income | Other Comprehensive Income (Loss) | Dividends |
| 2019 | $600,000 | $100 | $100,000 |
| 2020 | 700,000 | 120 | 100,000 |
| 2021 | 750,000 | (50) | 150,000 |
Eliminating entry (A) on the 2018 consolidation working paper includes:
| A. | A credit to beginning AOCI of $220 | |
| B. | A credit to beginning retained earnings of $950,000 | |
| C. | A debit to Investment in Subsidiary of $1,300,000 | |
| D. | A credit to beginning retained earnings of $500,220 |
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Payroll Accounting
Authors: Bernard J. Bieg, Judith A. Toland
2013 edition
113396253X, 978-1133962533
