Assume that on January 1, 2009, 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. On January 1, 2011, the subsidiary purchased a building for $480,000. The building has a useful life of 10 years and is depreciated on a straight-line basis with no salvage value. On January 1, 2013, the subsidiary sold the building to the parent for $420,000. The parent estimated that the building had an 8 year remaining useful life and no salvage value. The parent also uses the straight-line method of amortization. The parent’s “stand-alone” income (i.e., net income before recording any adjustments related to pre-consolidation investment accounting) is $500,000. The subsidiary’s recorded net income is $100,000. Noncontrolling interest and intercompany sale of depreciable assets Consolidated income attributable to noncontrolling interest: $6,400 $6,850 $10,000 $10,450
Assume that on January 1, 2009, 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. On January 1, 2011, the subsidiary purchased a building for $480,000. The building has a useful life of 10 years and is depreciated on a straight-line basis with no salvage value. On January 1, 2013, the subsidiary sold the building to the parent for $420,000. The parent estimated that the building had an 8 year remaining useful life and no salvage value. The parent also uses the straight-line method of amortization. The parent’s “stand-alone” income (i.e., net income before recording any adjustments related to pre-consolidation investment accounting) is $500,000. The subsidiary’s recorded net income is $100,000. Noncontrolling interest and intercompany sale of depreciable assets Consolidated income attributable to noncontrolling interest: $6,400 $6,850 $10,000 $10,450
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Assume that on January 1, 2009, 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. On January 1, 2011, the subsidiary purchased a building for $480,000. The building has a useful life of 10 years and is depreciated on a straight-line basis with no salvage value. On January 1, 2013, the subsidiary sold the building to the parent for $420,000. The parent estimated that the building had an 8 year remaining useful life and no salvage value. The parent also uses the straight-line method of amortization. The parent’s “stand-alone” income (i.e., net income before recording any adjustments related to pre-consolidation investment accounting) is $500,000. The subsidiary’s recorded net income is $100,000.
Noncontrolling interest and intercompany sale of depreciable assets
Consolidated income attributable to noncontrolling interest:
$6,400
$6,850
$10,000
$10,450
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