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Preparing a consolidated income statement-Cost method with noncontrolling interest, AAP and upstream and downstream intercompb. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consoli

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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

  
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