Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_step_2

Step: 3

blur-text-image_step3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

ACCA Advanced Audit And Assurance

Authors: Nick Blackwell, Annabel Lefton, Emile Woolf International

1st Edition

ISBN: 1848434715, 978-1848434714

More Books

Students also viewed these Accounting questions