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Preparing a consolidated Income statement-Equity method with RON A parent company purchased a 70controlling interest in its subsidiary several years ago. The aggregate for value
Preparing a consolidated Income statement-Equity method with RON A parent company purchased a 70controlling interest in its subsidiary several years ago. The aggregate for value of the controlling and noncontrolling interest was $700,000 in excess of the subsidiary's Stockholders' Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $400,000 and to an unrecorded patent valued at $300 OC The building asset is being deprecated over a 16 year period and the patent is being amortized over an 8 year period, both on the straight line basis with no salvage value. During the current the parent and subsidiary reported a total of 1,200,000 of intercompany sales. At the beginning of the current year, there were $80,000 of upstream intercompany profits in the parent's inventor At the end of the current year, there were $120,000 of downstream intercompany profits in the subsidiary's inventory. During the current year, the subsidiary declared and paid $160,000 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 Matement Sales $10.000.000 $2,000,000 Cost of 16.000.000 1.200.000 00000 50.000 Income brom dan Operating expenses Net income 100.000.000 141420 260.000 a Compute the income foss) from subsidiary of 574,250 reported by the parent company in its preconsolidation income statement Do not use negative signs with your answers below Susidarys net income AR Upstream preconsaction income statement Do not use negative signs with your answers below. Subsidiarys net income 5 AAP upstream sales Adjusted subsidiary income 5 Pof interest X Downstream sales Income dess from subsidiary 3 b. Prepare the consolidated income statement for the current year Do not use negative signs with your answers below. Consolidated Income Statement 1 Cost of roods sold Grass pot Operatinpenses #1
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