Question 16 16 A subsidiary is acquired on January 1, 2016 at an acquisition cost of $100 million The subsidiarys book value at the date of acquisition was $25 million, consisting of these accounts Capital stock $ 8,000,000 Retained earnings 18,000,000 Accumulated other comprehensive loss (1,000,000) Following is revaluation information for the subsidiarys identifiable net assets at the date of acquisition Fair Value Book Value Plant assets, net $40,000,000 $25,000,000 Straight line, 5 yrs Identifiable intangible assets 60,000,000 0 Straight line, 6 yrs It is now December 31, 2018, three years since the acquisition The subsidiary reported the following amounts during the period 2016 2018 2016 2017 2018 Net income $12,000,000 $10,000,000 $15,000,000 Other comprehensive income (loss) 300,000 (160,000) 125,000 The subsidiary did not declare any dividends during this period Goodwill for this acquisition is not impaired as of the end of 2018 The parent uses the complete equity method to report its investment on its own books Required Calculate equity in net income, reported on the parents books, for 2018 Show your work, i e what numbers were added, subtracted, multiplied or divided to arrive at your solution Partial credit is given for responses to this question IF supporting calculations are provided NO points are given if work is not provided (Points 8)

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 21, 2024

Question 16. 16. A subsidiary is acquired on January 1, 2016 at an acquisition cost of $100 million. The subsidiarys book value at the date

Question 16.16.

A subsidiary is acquired on January 1, 2016 at an acquisition cost of $100 million. The subsidiarys book value at the date of acquisition was $25 million, consisting of these accounts:

Capital stock	$ 8,000,000
Retained earnings	18,000,000
Accumulated other comprehensive loss	(1,000,000)

Following is revaluation information for the subsidiarys identifiable net assets at the date of acquisition:

	Fair Value	Book Value
Plant assets, net	$40,000,000	$25,000,000	Straight-line, 5 yrs
Identifiable intangible assets	60,000,000	0	Straight-line, 6 yrs

It is now December 31, 2018, three years since the acquisition. The subsidiary reported the following amounts during the period 2016-2018:

	2016	2017	2018
Net income	$12,000,000	$10,000,000	$15,000,000
Other comprehensive income (loss)	300,000	(160,000)	125,000

The subsidiary did not declare any dividends during this period. Goodwill for this acquisition is not impaired as of the end of 2018. The parent uses the complete equity method to report its investment on its own books.

Required

Calculate equity in net income, reported on the parents books, for 2018.

Show your work, i.e. what numbers were added, subtracted, multiplied or divided to arrive at your solution. Partial credit is given for responses to this question IF supporting calculations are provided. NO points are given if work is not provided. (Points : 8)