Homework Help is Here – Start Your Trial Now!
Business
Accounting
A parent company purchased a 65% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $750,000 in excess of the subsidiary's Stockholders' Equity on the acquisition date. This ex assigned to a building that was estimated to be undervalued by $450,000 and to an unrecorded patent valued at $300,000. The building asset is being depreciated over a 20-year period and the patent is being amortized over a 10-year period, both on the s basis with no salvage value. During the current year, the subsidiary declared and paid $120,000 of dividends. The parent company uses the equity method of pre-consolidation investment bookkeeping. Each company reports the following income statemen current year: Income statement: Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses Net income Parent Subsidiary $6,000,000 $1,800,000 (4.200.000) (1.080.000) 1.000.000 720.000 129,675 Sales Cost of goods sold Gross profit Operating expenses (1.140.000) (468.000) $789,675 $252.000 a. Compute the income (loss) from subsidiary of $129,675 reported by the parent company in its preconsolidation income statement. Do not use negative signs with your answers below. Subsidiary's net income $ AAP Adjusted subsidiary income S P% of interest X Income (loss) from subsidiary S 96 b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement S

A parent company purchased a 65% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $750,000 in excess of the subsidiary's Stockholders' Equity on the acquisition date. This ex assigned to a building that was estimated to be undervalued by $450,000 and to an unrecorded patent valued at $300,000. The building asset is being depreciated over a 20-year period and the patent is being amortized over a 10-year period, both on the s basis with no salvage value. During the current year, the subsidiary declared and paid $120,000 of dividends. The parent company uses the equity method of pre-consolidation investment bookkeeping. Each company reports the following income statemen current year: Income statement: Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses Net income Parent Subsidiary $6,000,000 $1,800,000 (4.200.000) (1.080.000) 1.000.000 720.000 129,675 Sales Cost of goods sold Gross profit Operating expenses (1.140.000) (468.000) $789,675 $252.000 a. Compute the income (loss) from subsidiary of $129,675 reported by the parent company in its preconsolidation income statement. Do not use negative signs with your answers below. Subsidiary's net income $ AAP Adjusted subsidiary income S P% of interest X Income (loss) from subsidiary S 96 b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement S

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question
Preparing a consolidated income statement-Equity method with noncontrolling interest and AAP A parent company purchased a 65% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $750,000 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 $450,000 and to an unrecorded patent valued at $300,000. The building asset is being depreciated over a 20-year period and the patent is being amortized over a 10-year period, both on the straight-line basis with no salvage value. During the current year, the subsidiary declared and paid $120,000 of dividends. The parent company uses the equity method of pre-consolidation investment bookkeeping. Each company reports the following income statement for the current year: Income statement: Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses Net income Parent Subsidiary $6,000,000 $1,800,000 (4.200,000) (1,080,000) 1,800,000 720,000 129,675 (1.140,000) (468.000) $789,675 $252,000 a. Compute the Income (loss) from subsidiary of $129,675 reported by the parent company in its preconsolidation income statement. Do not use negative signs with your answers below. Subsidiary's net income S AAP Adjusted subsidiary income $ P % of interest X Income (loss) from subsidiary Sales Cost of goods sold Gross profit Operating expenses b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement 000
Transcribed Image Text:Preparing a consolidated income statement-Equity method with noncontrolling interest and AAP A parent company purchased a 65% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $750,000 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 $450,000 and to an unrecorded patent valued at $300,000. The building asset is being depreciated over a 20-year period and the patent is being amortized over a 10-year period, both on the straight-line basis with no salvage value. During the current year, the subsidiary declared and paid $120,000 of dividends. The parent company uses the equity method of pre-consolidation investment bookkeeping. Each company reports the following income statement for the current year: Income statement: Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses Net income Parent Subsidiary $6,000,000 $1,800,000 (4.200,000) (1,080,000) 1,800,000 720,000 129,675 (1.140,000) (468.000) $789,675 $252,000 a. Compute the Income (loss) from subsidiary of $129,675 reported by the parent company in its preconsolidation income statement. Do not use negative signs with your answers below. Subsidiary's net income S AAP Adjusted subsidiary income $ P % of interest X Income (loss) from subsidiary Sales Cost of goods sold Gross profit Operating expenses b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement 000
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Consolidations
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS