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Computations (upstream and downstream sales) Comparative income statements of Son Corporation for the calendar years 2016, 2017, and 2018 are as follows (in thousands): 2016
Computations (upstream and downstream sales) | |||||
Comparative income statements of Son Corporation for the calendar years 2016, 2017, and 2018 are as follows (in thousands): |
2016 | 2017 | 2018 | |
Sales | 48000 | 51000 | 57000 |
Cost of Sales | 25200 | 26400 | 30000 |
Gross profit | 22800 | 24600 | 27000 |
Operating expenses | 18000 | 19200 | 22800 |
Net income | 4800 | 5400 | 4200 |
1. Son was a 75 percentowned subsidiary of Pop Corporation throughout the 20162018 period. Pops separate income | |||||||
(excludes income from Son) was $21,600,000, $20,400,000, and $24,000,000 in 2016, 2017, and 2018, respectively. Pop | |||||||
acquired its interest in Son at its underlying book value, which was equal to fair value on July 1, 2015. | |||||||
2. Pop sold inventory items to Son during 2016 at a gross profit to Pop of $2,400,000. Half the merchandise remained in | |||||||
Sons inventory at December 31, 2016. Total sales by Pop to Son in 2016 were $6,000,000. The remaining merchandise was sold by Son in 2017. | |||||||
3. Pops inventory at December 31, 2017, included items acquired from Son on which Son made a profit of $1,200,000. | |||||||
Total sales by Son to Pop during 2017 were $4,800,000. | |||||||
4. There were no unrealized profits in the December 31, 2018, inventories of either company. | |||||||
5. Pop uses the equity method of accounting for its investment in Son. | |||||||
Required: | |||||
1. Prepare a schedule showing Pops income from Son for the years 2016, 2017, and 2018. | |||||
2. Compute Pops net income for the years 2016, 2017, and 2018. | |||||
3. Prepare a schedule of consolidated net income for Pop Corporation and Subsidiary for the years 2016, | |||||
2017, and 2018, beginning with the separate incomes of the two affiliates and including non-controlling interest computations. | |||||
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