Answer:
a.
Reconciliation of Cost to Equity Method | |
Parent's pre consolidation net income (cost) | $2,570,000 |
Deduct: dividend income | ($70,000) |
Add: p% * NI(S) | $196,000 |
Deduct: p% * AAP amortisation | ($26,600) |
Add: p% * Upstream BOY | $49,000 |
Deduct: Downstream EOY | ($35,000) |
Net income attributable to controlling interest | $2,683,400 |
b.
Consolidated Income Statement | |
Sales (12,000,000 + 400,000) | $12,400,000 |
Cost of goods sold | ($7,100,000) |
Gross Profit | $ 5,300,000 |
Operating expenses | ($2,908,000) |
Net Income | $2,392,000 |
Net income attributable to non controlling interest | $291,400 |
Net income attributable to the parent | $2,683,400 |
Workings:
Dividend income 100,000 * 70% | 70,000 |
Net income of Subsidiary 280,000 * 70% | 196,000 |
Amortisation : 18,000 + 20,000 = 38,000 * 70 % | 26,600 |
Building - 180,000 / 10 = 18,000 | |
Trademark - 120,000 / 6 = 20000 | |
Upstream 70000 * 70% | 49000 |
Downstream 50000 * 70 % | 35000 |
Operating Expense = 2500000 + 370000 + 38000(amortization) = 2908000
Please comment in case of any doubt and give a like if satisfied
with the answer.
Preparing a consolidated income statement-Cost method with noncontrolling interest, AAP and upstream and downstream intercompany inventory...
Preparing a consolidated income statement—Cost method with noncontrolling interest, AAP and upstream and downstream intercompany inventory profits A parent company purchased a 70% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $300,000 in excess of the subsidiary’s Stockholders’ Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $180,000 and to an unrecorded Trademark valued at $120,000. The building asset...
Preparing a consolidated income statement Equity method with noncontrolling interest, AAP and upstream intercompany depreciable asset profits A parent company purchased an 80% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $460,000 in excess of the subsidiary's Stockholders' Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $300,000 and to an unrecorded Customer List valued at $160,000. The building...
Upstream versus downstream inventory profits and net income attributable to the noncontrolling interest Assume that on January 1, 2012, a parent company acquired a 90% interest in a subsidiary's voting common stock. On the date of acquisition, the fair value of the subsidiary's net assets equaled their reported book values. There were no intercompany sales during 2012. During the year ended December 31, 2013, the companies made $300,000 of intercompany sales. All intercompany sales include profits of 30% of selling...
Question 2Partially correctMark 5.00 out of 15.00 Not flaggedFlag question Question text Preparing a consolidated income statement—Equity method with noncontrolling interest, AAP and upstream and downstream intercompany inventory profits A parent company purchased a 70% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $350,000 in excess of the subsidiary’s Stockholders’ Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by...
Consolidation subsequent to date of acquisition - Equity method with noncontrolling interest and AAP Assume that, on January 1, 2009, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $500,000 over the book value of the subsidiary’s Stockholders’ Equity on the acquisition date. The parent assigned the excess to the following [A] assets: [A] Asset Initial Fair Value Useful Life (years) [A] Asset Initial Fair Value Useful Life...
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume a parent company acquires a 75% interest in its subsidiary for a purchase price of $924,000. The excess of the total fair value of the controlling and noncontrolling Interests over the book value of the subsidiary's Stockholders' Equity is assigned to a building in PPE, net) that is worth $88,000 more than its book value, an unrecorded patent with a fair value of $144,000, and Goodwill...
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a parent company acquires an 80% interest in its subsidiary for a purchase price of $620,800. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary's Stockholders' Equity is assigned to a building (in PPE, net) that the parent believes is worth $50,000 more than its book value, an: unrecorded Patent that the parent valued...
Consolidation worksheet for gain on constructive retirement of subsidiary’s debt with no AAP—Equity method Assume that a Parent company acquires a 80% interest in its Subsidiary on January 1, 2015. On the date of acquisition, the fair value of the 80 percent controlling interest was $640,000 and the fair value of the 20 percent noncontrolling interest was $160,000. On January 1, 2015, the book value of net assets equaled $800,000 and the fair value of the identifiable net assets equaled...
Assume that on January 1, 2018, a parent company acquired an 85% interest in a subsidiary's voting common stock. On the date of acquisition, the fair-value of the subsidiary's net assets equaled their reported book values except for machinery and equipment, which had a fair value of $780,000 and a reported book value of $325,000. the machinery and equipment had a 5-year remaining useful life and no salvage value. The following are the highly summarized pre-consolidation income statements of the...
Computing the amount of investment income and preparing [U] consolidation entries-Cost method Assume that a wholly owned subsidiary sells inventory to the parent company. The parent company, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2018 and 2019: % Inventory Subsidiary Net Intercompany Remaining at Receivable Income Inventory Sales Gross Profit % End of Year (Payable) 2019 $900,000 $135,000 3096 2096 $45,000 2018 $720,000 $108,000 3596 1596...