Question

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $250,000 in cash. The equipment had originally cost $225,000 but had a book value of only $137,500 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense is computed using the straight-line method. Ackerman reported $350,000 in net income in 2018 (not including any investment income) while Brannigan reported $114,500. Ackerman attributed any excess acquisition date fair value to Brannigan's unpatented technology, which was amortized at a rate of $4,500 per year. a. What is consolidated net income for 2018? b. What is the parent's share of consolidated net income for 2018 if Ackerman owns only 90 percent of Brannigan? c. What is the parent's share of consolidated net income for 2018 if Ackerman owns only 90 percent of Brannigan and the equipmen transfer was upstream? d. What is the consolidated net income for 2019 if Ackerman reports $370,000 (does not include investment income) and Brannigan $125,000 in income? Assume that Brannigan is a wholly owned subsidiary and the equipment transfer was downstream. Amounts a. Consolidated net income b. Consolidated net income to parent company C. Consolidated net income to parent company d. Consolidated net income

Answer 1

A)	Consolidated net income :
	Particulars	Amount($)	Amount($)
	Net income of Ackerman		$ 350,000
	Add: Net income of Brannigan		$ 114,500
	Less: Amortization of Un patented Technology		($ 4,500)
	Less: Unrealized Gain on equipment ($ 250,000- $137,500)	($ 112,500)
	Add: Adjustment of Depreciation ($ 112,500 / 5 years )	$ 22,500	($ 90,000)
	Consolidated net income		$ 370,000
B)	Particulars	Amount($)
	Net income of Brannigan	$ 114,500
	Less: Amortization of Un patented Technology	($ 4,500)
	Adjusted Net income	$ 110,000
	Consolidated net income (See Required 1 )	$ 370,000
	less: NCI income ( $ 110,000 *10 % )	($ 11,000)
	Net income To Ackerman	$ 381,000
C)	Particulars	Amount($)	Amount($)
	Net income of Brannigan		$ 114,500
	Less: Amortization of Un patented Technology		($ 4,500)
	Less: Unrealized Gain on equipment ($ 250,000- $137,500)	($ 112,500)
	Add: Adjustment of Depreciation ($ 112,500 / 5 years )	$ 22,500	($ 90,000)
	Adjusted Net income		$ 20,000
	Consolidated net income (See Required 1 )	$ 370,000
	less: NCI income ( $ 20,000 *10 % )	($ 2,000)
	Net income To Ackerman	$ 368,000
D)	Particulars	Amount($)	Amount($)
	Net income of Ackerman		$ 370,000
	Add: Net income of Brannigan		$ 125,000
	Less: Amortization of Un patented Technology		($ 4,500)
	Less: Unrealized Gain on equipment ($ 250,000- $137,500)	($ 112,500)
	Add: Adjustment of Depreciation ($ 112,500 / 5 years )	$ 22,500	($ 90,000)
	Consolidated net income for 2019		$ 400,500

Answer 2

250,000 was used for orginal book valued shouldnt been 225,000 instead ?