Question
Preparing a consolidated income statementEquity method with noncontrolling interest, AAP and upstream intercompany depreciable asset profits A parent company purchased an 80% controlling interest in
Preparing a consolidated income statementEquity method with noncontrolling interest, AAP and upstream intercompany depreciable asset profits A parent company purchased an 80% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $230,000 in excess of the subsidiarys Stockholders Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $150,000 and to an unrecorded Customer List valued at $80,000. The building asset is being depreciated over a 12-year period and the Customer List is being amortized over a 5-year period, both on the straight-line basis with no salvage value. During a previous year, the subsidiary sold to the parent company a piece of depreciable property. The unconfirmed upstream gain on this intercompany transaction was $60,000 at the beginning of the current year. The upstream gain confirmed each year is $15,000. During the current year, the subsidiary declared and paid $90,000 of dividends. The parent company uses the equity method of pre-consolidation investment bookkeeping. Each company reports the following income statement for the current year:
Parent | Subsidiary | |
---|---|---|
Income statement: | ||
Sales | $12,000,000 | $1,200,000 |
Cost of goods sold | (8,400,000) | (720,000) |
Gross profit | 3,600,000 | 480,000 |
Income (loss) from subsidiary | 123,600 | - |
Operating expenses | (2,280,000) | (312,000) |
Net income | $1,443,600 | $168,000 |
a. Compute the Income (loss) from subsidiary of $123,600 reported by the parent company in its pre-consolidation income statement.
Do not use negative signs with your answers below.
Subsidiary's net income | Answer | ||
AAP | Answer | ||
Confirmed upstream gain | Answer | ||
Adjusted subsidiary income | Answer | ||
P % of interest | X | Answer | % |
Income (loss) from subsidiary | Answer |
b. Prepare the consolidated income statement for the current year.
Do not use negative signs with your answers below.
Consolidated Income Statement | |
---|---|
Sales | Answer |
Cost of goods sold | Answer |
Gross profit | Answer |
Operating expenses | Answer |
AnswerNet income attributable to noncontrolling interestsNet income attributable to the parentNet income | Answer |
AnswerNet income attributable to noncontrolling interestsNet income attributable to the parentNet income | Answer |
AnswerNet income attributable to noncontrolling interestsNet income attributable to the parentNet income | Answer |
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