Question

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $120,000 in cash. The equipment had originally cost $108,000 but had a book value of only $66,000 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense is computed using the straight-line method.

Ackerman reported $540,000 in net income in 2018 (not including any investment income) while Brannigan reported $177,200. Ackerman attributed any excess acquisition-date fair value to Brannigan's unpatented technology, which was amortized at a rate of $6,400 per year.

1. What is consolidated net income for 2018?
2. What is the parent's share of consolidated net income for 2018 if Ackerman owns only 90 percent of Brannigan?
3. 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?
4. What is the consolidated net income for 2019 if Ackerman reports $560,000 (does not include investment income) and Brannigan $189,600 in income? Assume that Brannigan is a wholly owned subsidiary and the equipment transfer was downstream.

Answer 1

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. Consolidated net income to Patt ompany of arset p. 1120,000-66 , ooo The EapipMex , thenthe 95% was LLP o holding Comp Dl o54000 y86 00 Consolidated net incon e $693080-48600 le Confolidat toe ontulidaed inomtiartfon Valuc すbuu48D-6400 $ 638080 Consolidatled e incowe Case om hold n Eani di aniy- Fr6o.coo, Sud fiday are6 Consolidated İncom ez 4560,000+41896002 It 4940D Consolidated net inom: $749400-$1406 743200