Question
Large Corporation purchased an 90 percent interest in Small Corporation for $900,000 on January 1, 2016, at which time Smallns stockholders equity consisted of $700,000
Large Corporation purchased an 90 percent interest in Small Corporation for $900,000 on January 1, 2016, at which time Smallns stockholders equity consisted of $700,000 common stock and $200,000 retained earnings. The excess fair value over book value was goodwill. Comparative income statements for the two corporations for 2017 are as follows
Large | Small | |
Sales | $2,500 | $1,000 |
Income from Son | 300 | |
Cost of sales | (1,000) | (500) |
Depreciation expense | (250) | (75) |
Other expenses | (250) | (100) |
Net income | $1,300 | $325 |
Dividends of Large and Small for all of 2017 were $500,000 and $200,000, respectively. During 2016 Small sold inventory items to Large for $150,000. This merchandise cost Small $100,000, and one-fifth of it remained in Larges December 31, 2016, inventory. During 2078 Smalls sales to Large were $160,000. This merchandise cost Small $120,000, and one-half of it remained in Larges December 31, 2017, inventory.
Prepare a consolidated income statement for Large Corporation and Subsidiary for the year ended December 31, 2017. (show all work/computations to support answer)
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