Use the following facts for Multiple Choice problems 18-20. Each of the problems is independent of the other. Assume a parent company owns a 100% controlling interest in its long-held subsidiary. The following excerpts are from the parent's and subsidiary's "stand alone" pre-consolidation income statements for the year ending December 31, 2022, prior to any investment bookkeeping or intercompany adjustments: Revenues.. Cost of goods sold Gross profit.. Selling general & administrative expenses. Net income. Parent Subsidiary $5,200,000 $3,250,000 (3,640,000) (1,950,000) 1,560,000 (1,014,000) $546,000 a. b. 1,300,000 (787,800) $ 512,200 On January 1, 2022, neither company held any inventories purchased from the other affiliate. All of the sales made by either company have the same gross margin regardless of whether they are made to affiliates or non-affiliates. The subsidiary declared and paid $260,000 of dividends during 2022. 18. Pre-consolidation bookkeeping, downstream intercompany sales, profits in ending inventory- Equity method Assume during the year ended December 31, 2022, a parent sold to its subsidiary $650,000 of mer- chandise. At December 31, 2022, the subsidiary still held in its inventory 25% of the goods purchased from the parent during 2022. What is the amount of "income from subsidiary" recognized by the parent company if it applies the equity method of pre-consolidation investment bookkeeping? $560,950 c. $512,200 $546,000 d. $463,450
Use the following facts for Multiple Choice problems 18-20. Each of the problems is independent of the other. Assume a parent company owns a 100% controlling interest in its long-held subsidiary. The following excerpts are from the parent's and subsidiary's "stand alone" pre-consolidation income statements for the year ending December 31, 2022, prior to any investment bookkeeping or intercompany adjustments: Revenues.. Cost of goods sold Gross profit.. Selling general & administrative expenses. Net income. Parent Subsidiary $5,200,000 $3,250,000 (3,640,000) (1,950,000) 1,560,000 (1,014,000) $546,000 a. b. 1,300,000 (787,800) $ 512,200 On January 1, 2022, neither company held any inventories purchased from the other affiliate. All of the sales made by either company have the same gross margin regardless of whether they are made to affiliates or non-affiliates. The subsidiary declared and paid $260,000 of dividends during 2022. 18. Pre-consolidation bookkeeping, downstream intercompany sales, profits in ending inventory- Equity method Assume during the year ended December 31, 2022, a parent sold to its subsidiary $650,000 of mer- chandise. At December 31, 2022, the subsidiary still held in its inventory 25% of the goods purchased from the parent during 2022. What is the amount of "income from subsidiary" recognized by the parent company if it applies the equity method of pre-consolidation investment bookkeeping? $560,950 c. $512,200 $546,000 d. $463,450
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Use the following facts for Multiple Choice problems 18-20. Each of the problems is independent of
the other.
Assume a parent company owns a 100% controlling interest in its long-held subsidiary. The following
excerpts are from the parent's and subsidiary's "stand alone" pre-consolidation income statements for the
year ending December 31, 2022, prior to any investment bookkeeping or intercompany adjustments:
Revenues..
Cost of goods sold
Gross profit..
Selling general & administrative expenses.
Net income.
Parent
Subsidiary
$5,200,000 $3,250,000
(3,640,000) (1,950,000)
1,560,000
(1,014,000)
$546,000
a.
b.
1,300,000
(787,800)
$ 512,200
On January 1, 2022, neither company held any inventories purchased from the other affiliate. All of the sales
made by either company have the same gross margin regardless of whether they are made to affiliates or
non-affiliates. The subsidiary declared and paid $260,000 of dividends during 2022.
18. Pre-consolidation bookkeeping, downstream intercompany sales, profits in ending inventory-
Equity method
Assume during the year ended December 31, 2022, a parent sold to its subsidiary $650,000 of mer-
chandise. At December 31, 2022, the subsidiary still held in its inventory 25% of the goods purchased
from the parent during 2022. What is the amount of "income from subsidiary" recognized by the parent
company if it applies the equity method of pre-consolidation investment bookkeeping?
$560,950
c. $512,200
$546,000
d.
$463,450
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