Part A) Assume that on January 1, 2009, a parent company acquired a 90% interest in a subsidiarys voting common stock. On the date of acquisition, the fair value of the subsidiarys net assets equaled their reported book values. On January 1, 2011, the subsidiary purchased a building for $480,000. The building has a useful life of 10 years and is depreciated on a straight-line basis with no salvage value. On January 1, 2013, the subsidiary sold the building to the parent for $420,000. The parent estimated that the building had an 8 year remaining useful life and no salvage value. The parent also uses the straight-line method of amortization. The parents stand-alone income (i.e., net income before recording any adjustments related to pre-consolidation investment accounting) is $500,000. The subsidiarys recorded net income is $100,000.

Intercompany sale of depreciable assets Consolidated net income attributable to the controlling interest:

A) $561,650

B) $590,000

C) $594,500

D) $558,500

Part B:

Assume that a Parent Company owns 100 percent of its Subsidiary. Each of the following independent scenarios describes an intercompany bond transaction between the Parent and the Subsidiary. For each independent case, determine the amount of gain or loss on constructive retirement of the bond reported in the consolidated income statement for the year ended December 31, 2019. Assume straight-line amortization.

a. On June 30, 2019, P issues directly to S bonds that have a par value of $180,000. S paid $187,200 for the bonds. The term of the bonds is 10 years and they have an 8 percent stated interest rate. Interest is paid annually on December 31.

b. On January 1, 2015, P issues to an unaffiliated company bonds that have a par value of $180,000. The unaffiliated company paid par value for the bonds. On December 31, 2019, S paid $126,000 for 70 percent of the outstanding bonds. The bond term is 10 years and they have an 8 percent stated interest rate. Interest is paid annually on December 31.

c. On January 1, 2015, P issues to an unaffiliated company bonds that have a par value of $180,000. The unaffiliated company paid 103 percent of par value for the bonds. Five years later, S paid $171,000 for all of the outstanding bonds. The bond term is 10 years and they have an 8 percent stated interest rate. Interest is paid annually on December 31.

d. On January 1, 2015, S issues to an unaffiliated company bonds that have a par value of $180,000. The unaffiliated company paid 96 percent of par value for the bonds. Five years later, P paid $129,780 for 70 percent of the outstanding bonds. The bond term is 10 years and they have an 8 percent stated interest rate. Interest is paid annually on December 31.

Note: If there is no gain or loss, enter zero for the amount and select N/A for Gain or Loss answer. Do not use negative signs with any of your answers.

Case	Amount	Gain or Loss
a.	Answer	AnswerGainLossN/A
b.	Answer	AnswerGainLossN/A
c.	Answer	AnswerGainLossN/A
d.	Answer	AnswerGainLossN/A