Assume on January 1, 2018, a parent company acquired a 75% 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. On January 1, 2020, the subsidiary purchased a building for $432,000 The building has a useful life of 8 years and is depreciated on a straight-line basis with no salvage value. On January 1, 2022, the subsidiary sold the building to the parent for $360,000 The parent estimated that the building had a six-year remaining useful life and no salvage value. The parent also uses the straight-line method of amortization. For the year ending December 31, 2022, the parent’s “stand-alone” income (i.e., net income before recording any adjustments related to preconsolidation investment accounting) is $450,000 . The subsidiary’s recorded net income is $90,000 Based on this information, determine the balance for Income from Equity investment (on parent’s pre-consolidations books preceding consolidation)
Assume on January 1, 2018, a parent company acquired a 75% 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. On January 1, 2020, the subsidiary purchased a building for $432,000 The building has a useful life of 8 years and is
Select one:
a. $73,500
b. $37,500
c. $67,500
d. $45,000
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