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QUESTION 2 Incomplete answer Marked out of 30.00 Flag question Preparing a consolidated income statement-Cost method with noncontrolling interest, AAP and upstream intercompany depreciable asset profits A parent company purchased a 90% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $276,000 in excess of the subsidiary's Stockholders' Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $180,000 and to an unrecorded patent valued at $96,000. The building asset is being depreciated over a 12-year period and the patent is being amortized over an 8-year period, both on the straight line basis with no salvage value. During a previous year, the subsidiary sold to the parent company a piece of depreciable property. The unconfirmed upstream gain on this intercompany transaction was $120,000 at the beginning of the current year. The upstream gain confirmed each year is $24,000. During the current year, the subsidiary declared and paid $90,000 of dividends. The parent company uses the cost method of pre-consolidation investment bookkeeping. Each company reports the following income statement for the current year: Parent Subsidiary Income statement: Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses $4,600,000 $1,500,000 (3,280,000) (924,000) 1,320,000 576,000 81,000 (960,000) (384,000) $441,000 $192,000 Net income a. Starting with the parent's current-year pre-consolidation net income of $441,000, compute the amount of current-year net income attributable to the parent that will be reported in the consolidated financial statements. Do not use negative signs with your answers below. Reconciliation of Cost to Equity Method Parent's pre-consolidation net income Dividend Income P% x Net income of subsidiary P% x AAP amortization 9% of Upstream profit Net income attributable to controlling interest QUESTION 2 Incomplete answer Marked out of 30.00 Flag question Preparing a consolidated income statement-Cost method with noncontrolling interest, AAP and upstream intercompany depreciable asset profits A parent company purchased a 90% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $276,000 in excess of the subsidiary's Stockholders' Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $180,000 and to an unrecorded patent valued at $96,000. The building asset is being depreciated over a 12-year period and the patent is being amortized over an 8-year period, both on the straight line basis with no salvage value. During a previous year, the subsidiary sold to the parent company a piece of depreciable property. The unconfirmed upstream gain on this intercompany transaction was $120,000 at the beginning of the current year. The upstream gain confirmed each year is $24,000. During the current year, the subsidiary declared and paid $90,000 of dividends. The parent company uses the cost method of pre-consolidation investment bookkeeping. Each company reports the following income statement for the current year: Parent Subsidiary Income statement: Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses $4,600,000 $1,500,000 (3,280,000) (924,000) 1,320,000 576,000 81,000 (960,000) (384,000) $441,000 $192,000 Net income a. Starting with the parent's current-year pre-consolidation net income of $441,000, compute the amount of current-year net income attributable to the parent that will be reported in the consolidated financial statements. Do not use negative signs with your answers below. Reconciliation of Cost to Equity Method Parent's pre-consolidation net income Dividend Income P% x Net income of subsidiary P% x AAP amortization 9% of Upstream profit Net income attributable to controlling interest