Question

17. A parent company consolidates its 80%-owned subsidiary. It is now December 31, 2021. The following information is available: • The subsidiary's reported net income for 2021 is $30,000. • The subsidiary sells merchandise to the parent at a markup of 15% on cost. The parent's 2021 ending inventory balance contains $1,725 in merchandise purchased from the subsidiary. The parent's 2021 beginning inventory contains $2,300 in merchandise purchased from the subsidiary. Total sales price of merchandise transferred between the subsidiary and the parent in 2018 is $45,000. The parent sold equipment to the subsidiary at the beginning of 2019, at a gain of $40,000. The equipment had a 10-year remaining life at the time, straight-line. The subsidiary still holds the equipment at the end of 2021. Write-offs of identifiable intangibles recognized when the parent acquired the subsidiary total $8,000. There are no other revaluation write-offs for 2021. The parent uses the complete equity method to report its investment in subsidiary on its own books. Required Calculate equity in net income for 2021, reported on the parent's books, and the noncontrolling interest in net income for 2021, reported on the consolidated income statement

Answer 1

PROFIT FOR THE YEAR 2021	$ 30,000.00
ADD:
OPENING INVENTORY	$        300.00
2300/115*15
LESS:
INTRA PROFIT TRANSFER ON STOCK	$        225.00
ENDING INVENTORY 1725/115*15
DEPRECIATION ON EQUIPMENT SOLD TO PARENT	$    8,000.00
40000/10*2
WRITE OFF'S OF SUBSIDIARY	$    8,000.00
NET ADJUSTED INCOME	$ 14,075.00
HOLDING'S SHARE 80%	$ 11,260.00
NON CONTROLLING INTEREST 20%	$    2,815.00