ZuoTi.Pro
Question

A Parent Company owns 100% of its Subsidiary. During 2013, the Parent company reports net income...

A Parent Company owns 100% of its Subsidiary. During 2013, the Parent company reports net income of $1,000,000 and the subsidiary reports net income of $400,000. The Parent had a bond payable outstanding on July 1, 2012, with a carry value equal to $840,000. The Subsidiary acquired the bond on July 1, 2012 for $790,000. During 2013, the Parent reported interest expense (related to the bond) of $70,000 while the Subsidiary reported interest income (related to the bond) of $64,000. What is consolidated net income for the year ended December 31, 2013?

a.   $1,400,000

b.   $1,406,000

c.   $1,450,000

d.   $1,456,000


Please provide step by step explanation for the answer.

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Parent company Income = 1,000,000

Subsidairy Income = 400,000

Consolidated Income = 1,000,000 + 400,000 + 6000 = 1,406,000 ................ Option - B

cancellation of excess of Interest expenses over Income = 70000 - 64000 = 6,000

0 0
Add a comment
Know the answer?
Add Answer to:
A Parent Company owns 100% of its Subsidiary. During 2013, the Parent company reports net income...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Assume that a parent company owns 75 percent of its subsidiary. On January 1, 2016, the...

    Assume that a parent company owns 75 percent of its subsidiary. On January 1, 2016, the parent company had a $100,000 (face value) 8 percent bond payable outstanding with a carrying value of $94,000. Several years ago, the bond was originally issued to an unaffiliated company for 92% of par value. On January 1, 2016, the subsidiary acquired the bond for $91,000. During 2016, the parent company reported $400,000 of (pre-consolidation) income from its own operations (prior to any equity...

  • A parent owns less than 100% of the voting stock of its subsidiary. On its consolidated...

    A parent owns less than 100% of the voting stock of its subsidiary. On its consolidated income statement, the earnings per share number is calculated using which of the following amounts in the numerator? A. Consolidated net income less consolidated dividends B. Consolidated net income C. Consolidated net income plus noncontrolling interest in net income D. Consolidated net income less noncontrolling interest in net income

  • Problem b-TT (LU 6-3) Dane, Inc., owns Carlton Corporation. For the current year, Dane reports net...

    Problem b-TT (LU 6-3) Dane, Inc., owns Carlton Corporation. For the current year, Dane reports net income (without consideration of its investment in Carlton) of $255,000 and the subsidiary reports $102,750. The parent had a bond payable outstanding on January 1, with a carrying amount of $237,000. The subsidiary acquired the bond on that date for $219,500. During the current year, Dane reported interest expense of $17,850 while Carlton reported interest income of $16,950, both related to the intra-entity bond...

  • On January 1, 2009, Black Corporation sold equipment to its 70-percent-owned subsidiary, Levant Company, for $840,000. The equipment originally was purchased at the beginning of 2006 for $1,920,000. L...

    On January 1, 2009, Black Corporation sold equipment to its 70-percent-owned subsidiary, Levant Company, for $840,000. The equipment originally was purchased at the beginning of 2006 for $1,920,000. Levant continued to depreciate the equipment, with an original five year useful life, on a straight-line basis over its remaining 2-year life. The equipment's residual value is considered negligible. On July 7, 2009, Levant sold idle land to its parent for $260,000. The land's carrying amount on Levant's books was $180,000. During...

  • Provided are the consolidated trial balances of a parent and its less-than-wholly-owned subsidiary. Account Dr (Cr)...

    Provided are the consolidated trial balances of a parent and its less-than-wholly-owned subsidiary. Account Dr (Cr) Current assets $ 4,000 Property, net 95,000 Intangible assets, net 15,000 Goodwill 100,000 Liabilities (180,140) Capital stock (10,000) Retained earnings, beginning (16,000) Accumulated other comprehensive income, beginning (500) Noncontrolling interest (2,000) Dividends 500 Sales revenue (390,000) Cost of sales and operating expenses 385,000 Other comprehensive income (1,000) Noncontrolling interest in net income 150 Noncontrolling interest in other comprehensive loss (10) Total $ 0 The...

  • Upstream versus downstream inventory profits and net income attributable to the noncontrolling interest Assume that on...

    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...

  • A parent owns 80% of its subsidiary. At the beginning of the current year, the parent...

    A parent owns 80% of its subsidiary. At the beginning of the current year, the parent sells equipment carried on its books at $40,000 to its subsidiary for $50,000. The equipment has a 2-year remaining life, straight-line. What is the effect of the above on equity in net income for the current year, reported on the parent's books, assuming the parent uses the complete equity method? A. $8,000 decrease B. $5,000 decrease C. No effect D. $4,000 decrease

  • 17. A parent company consolidates its 80%-owned subsidiary. It is now December 31, 2021. The following...

    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...

  • Assume that on 1/1/X0, a parent company acquires a 70% interest in its subsidiary for a price at ...

    Assume that on 1/1/X0, a parent company acquires a 70% interest in its subsidiary for a price at $480,000 over book value. The excess is assigned as follows: Asset Fair Value Useful Life Patent $320,000 8 years Goodwill 160,000 Indefinite 70% of the goodwill is allocated to the parent. Included in the attached Excel spreadsheet are the pre-consolidation financial statements for both the parent and the subsidiary. Submission Requirements: Prepare the consolidated financial statements at 12/31/X6 by placing the appropriate...

  • A parent sells merchandise to its 90%-owned subsidiary at a markup of 20% on cost. The...

    A parent sells merchandise to its 90%-owned subsidiary at a markup of 20% on cost. The parent's beginning inventory includes $120,000 purchased from the subsidiary. The parent's ending inventory includes $156,000 purchased from the subsidiary. What is the impact of the above information on noncontrolling interest in net income, reported on the consolidated income statement for the year? A. Subtract $6,000 B. Subtract $3,000 C. Subtract $600 D. No effect

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT