(Consolidated income statement, LO 1) Explain how the following items would affect consolidated net income in the year the subsidiary is purchased and the year after it is purchased:

a. Impairment of the value of goodwill.

b. Land with a book value of $2,000,000 on the subsidiary’s balance sheet on the date the subsidiary was purchased has a fair value of $5,000,000 on that date.

c. Equipment with a book value of $1,000,000 on the subsidiary’s balance sheet on the date the subsidiary was purchased has a fair value of $1,500,000 on that date. The equipment has a remaining useful life of five years.

d. Inventory with a book value of $200,000 on the subsidiary’s balance sheet on the date the subsidiary was purchased has a fair value of $230,000 on that date.

e. Dividends paid by the subsidiary to the parent.

f. Services sold at a profit by the subsidiary to the parent.
g. The subsidiary is 80% owned by the parent.