Preparing a consolidated income statementEquity method with noncontrolling interest and AAP A parent company purchased a 65 controlling interest in its subsidiary several years ago The aggregate fair value of the controlling and noncontrolling interest was $250,000 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 patent valued at $100,000 The building asset is being depreciated over a 20 year period and the patent is being amortized over a 10 year period, both on the straight line basis with no salvage value During the current year, the subsidiary declared and paid $40,000 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 $6,000,000 $600,000 Cost of goods sold (4,200,000) (360,000) Gross profit 1,800,000 240,000 Income (loss) from subsidiary 43,225 Operating expenses (1,140,000) (156,000) Net income $703,225 $84,000 a Compute the Income (loss) from subsidiary of $43,225 reported by the parent company in its preconsolidation income statement Do not use negative signs with your answers below Subsidiary's net income $Answer AAP 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 Answer Net income attributable to noncontrolling interests Net income attributable to the parent Net income Answer Answer Net income attributable to noncontrolling interests Net income attributable to the parent Net income Answer Answer Net income attributable to noncontrolling interests Net income attributable to the parent Net income $Answer

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Preparing a consolidated income statementEquity method with noncontrolling interest and AAP A parent company purchased a 65% controlling interest in its subsidiary several years ago.

Preparing a consolidated income statementEquity method with noncontrolling interest and AAP

A parent company purchased a 65% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $250,000 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 patent valued at $100,000. The building asset is being depreciated over a 20-year period and the patent is being amortized over a 10-year period, both on the straight-line basis with no salvage value. During the current year, the subsidiary declared and paid $40,000 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	$6,000,000	$600,000
Cost of goods sold	(4,200,000)	(360,000)
Gross profit	1,800,000	240,000
Income (loss) from subsidiary	43,225	-
Operating expenses	(1,140,000)	(156,000)
Net income	$703,225	$84,000

a. Compute the Income (loss) from subsidiary of $43,225 reported by the parent company in its preconsolidation income statement.

Do not use negative signs with your answers below.

Subsidiary's net income		$Answer
AAP		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
Answer --> Net income attributable to noncontrolling interests/Net income attributable to the parent/Net income	Answer
Answer --> Net income attributable to noncontrolling interests/Net income attributable to the parent/Net income	Answer
Answer --> Net income attributable to noncontrolling interests/Net income attributable to the parent/Net income	$Answer