On the acquisition day, Jan 1, 2019, Parent acquired 80 of Sub's 10,000 shares for $ 528,000 On that day, Sub had the followings Acquisition differentials A R (5,000) Cr Inventory (10,000) Cr Machines (average 10 year useful life) 10,000 Dr Bank loan (6 years useful life) (6,000) Cr Goodwill 4,000 For 2019, the two companies have the following income statements Parent Sub Sales $ 900,000 $ 700,000 Cost of Sales 500,000 420,000 Gross profit 400,000 280,000 Gain on sales of machine 4,680 Gain on sales of investments 8,600 Dividends from Sub 4,200 Expenses Amortization of equipment building 11,000 8,000 Bad debts 15,000 29,000 Interest on long term debt 7,000 5,500 Goodwill impairment 600 500 Other expenses including taxes 94,000 66,000 Net income for the year 285,200 175,680 Additional information On July 1, 2019, Sub sold Parent a machine for $32,013 33 cash This machine was purchased on Jan 1, 2014 at a price of $42,000 At that time, the machine was estimated to have a useful life of 15 years and a residual value of $2,000 Parent agreed on the estimated useful life and residual value Sub uses straight line method for expense recognition During 2019, Parent sold inventories to Sub and earned sales of $100,000 from this transaction On Dec 31, 2019, 5 of the purchased inventories remained in Sub's account During 2019, Sub sold inventories to Parent and earned sales of $140,000 from this transaction On Dec 31, 2019, 10 of the purchased inventories remained in Parent's account On July 1, Parent sold some shares of Sub for $75,000 cash, which brought its interest down to 70 Sub declared dividends of $6,000 on Dec 30, 2019 Both companies have an income tax rate of 40 Parent applies the entity theory for consolidation and use the cost method for equity investment Ignore income tax for the gain on sales of investments Required based on the given information, Prepare a consolidated income statement for 2019 Show all the adjustments for the balance sheet as of Dec 31, 2019 A part of the solution Total consolidated income $456,226 NCI in profit for 2019 $46,289 94737 NCI on the consolidated balance sheet as of Dec 31, 2019 $242,489 9 Total adjustment for machine reported as of Dec 31, 2019 4566 315 Dr

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Posted on Sep 09, 2024

On the acquisition day, Jan.1, 2019, Parent acquired 80% of Sub's 10,000 shares for $ 528,000. On that day, Sub had the followings:

Acquisition differentials

A/R (5,000) Cr.

Inventory (10,000) Cr.

Machines (average 10 year useful life) 10,000 Dr

Bank loan (6 years useful life) (6,000) Cr

Goodwill -4,000 .

For 2019, the two companies have the following income statements:

Parent Sub

Sales $ 900,000 $ 700,000

Cost of Sales 500,000 420,000

Gross profit 400,000 280,000

Gain on sales of machine 4,680

Gain on sales of investments 8,600

Dividends from Sub 4,200

Expenses:

Amortization of equipment & building 11,000 8,000

Bad debts 15,000 29,000

Interest on long term debt 7,000 5,500

Goodwill impairment 600 500

Other expenses including taxes 94,000 66,000

Net income for the year 285,200 175,680

Additional information:

On July 1, 2019, Sub sold Parent a machine for $32,013.33 cash. This machine was purchased on Jan. 1, 2014 at a price of $42,000. At that time, the machine was estimated to have a useful life of 15 years and a residual value of $2,000. Parent agreed on the estimated useful life and residual value. Sub uses straight-line method for expense recognition.
During 2019, Parent sold inventories to Sub and earned sales of $100,000 from this transaction. On Dec 31, 2019, 5% of the purchased inventories remained in Sub's account.
During 2019, Sub sold inventories to Parent and earned sales of $140,000 from this transaction. On Dec 31, 2019, 10% of the purchased inventories remained in Parent's account.
On July 1, Parent sold some shares of Sub for $75,000 cash, which brought its interest down to 70%.
Sub declared dividends of $6,000 on Dec 30, 2019.
Both companies have an income tax rate of 40%.
Parent applies the entity theory for consolidation and use the cost method for equity investment.
Ignore income tax for the gain on sales of investments.

Required: based on the given information,