Question

Problem 5-24 (LO 5-7) Check my work On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $260,000 in cash. The equipment had originally cost $234.000 but had a book value of only $143,000 when transferred. On that date, the equipment had a five- year remaining life. Depreciation expense is computed using the straight-line method Ackerman reported $360,000 in net income in 2018 (not including any investment income) while Brannigan reported $117,800. Ackerman attributed any excess acquisition date fair value to Brannigan's unpatented technology, which was amortized at a rate of $4,600 per year. ces 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 equipment transfer was upstream? d. What is the consolidated net income for 2019 If Ackerman reports $380,000 (does not include Investment income) and Brannigan $128,400 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

Problem 5-24's solution Given that, -> on January 1, 2018 Ackerman sold equipment to - Brannigan for $260.000 .-> Depreciation esspense is computed by using the Stviant line method a> Ackerman attributed any excess acquisition - . date fary value to Brannigan inpatented technology. -> Brannigan is a ustestly wholly owned subsidiary and the equipment transfer. was downstream.

a) consolidated Net Income . Ackerman net income for 2018 = $360.000 Brannigan net income for 2018 = $ 117,800 $477,800 consolidated net income is sum of above both . theit is $177,500 - $4,600 : . $473,200), & n6oo is amortization of excess accouisition- data fair vaine for unpatented technology. .

/ b) consolidated net income to parent company 90% of subsidiary = $117,800 X901 : $ 10 GOZO consolidated Income = $360,000 + $ 1061020 ..=8466,020 consolidated Net Income $466,020 - $1,600 =($461,420), . T c) consolidated net income to parent company: profit on transter of asset = $260,000 - $143.000 = $113,000 The equipment transfer was upstream, therefore aol of profit deducedó exom Earning of Holding is company, 901.0f $ 117,000 - $105,300.

consolidated Income = $461,420-$105,300 = $.356,120 consolidated Net Income =$356,120 - $4,800 : : $351,52011, b). consolidated Net Income: In the given. Gase eeguipment transfer was downstream profit on transfer cannot be reduced from i holding company -> Holding Garning ? $ 380,000 subsidiary. Earning... $.128,400 $508,400 consolidates Net Income $508,400-$4600 ::- ($50318001

Summary $473,200 $461,420 a) consolidated Net Income b) consolidated wet Income to parent company c) consolidated Net Income . ... to parent company d) consolidated Net Income $ 351,520 $ 503,800
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