Question
In its 20X7 consolidated income statement, Bower Development Company reported consolidated net income of $969,000 and $48,000 of income assigned to the 30 percent noncontrolling
In its 20X7 consolidated income statement, Bower Development Company reported consolidated net income of $969,000 and $48,000 of income assigned to the 30 percent noncontrolling interest in its only subsidiary, Subsidence Mining, Inc. During the year, Subsidence had sold a previously mined parcel of land to Bower for a new housing development; the sales price to Bower was $485,000, and the land had a carrying amount at the time of sale of $600,000. At the beginning of the previous year, Bower had sold excavation and grading equipment to Subsidence for $261,000; the equipment had a remaining life of 6 years as of the date of sale and a book value of $210,000. The equipment originally had cost $350,000 when Bower purchased it on January 2, 20X2. The equipment never was expected to have any salvage value. |
Bower had acquired 70 percent of the voting shares of Subsidence 8 years earlier when the fair value of its net assets was $280,000 higher than book value, and the fair value of the noncontrolling interest was $84,000 more than a proportionate share of the book value of Subsidences net assets. All the excess over the book value was attributable to intangible assets with a remaining life of 10 years from the date of combination. Both parent and subsidiary use straight-line amortization and depreciation. Assume Bower uses the fully adjusted equity method. |
Required: | |
a. | Present the journal entry made by Bower to record the sale of equipment in 20X6 to Subsidence. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |
b. | Present all consolidation entries related to the intercompany transfers of land and equipment that should appear in the consolidation worksheet used to prepare a complete set of consolidated financial statements for 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |
c. | Compute Subsidences 20X7 reported net income. |
d. | Compute Bowers 20X7 income from its own separate operations, excluding any investment income from its investment in Subsidence Mining. |
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