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comparative staten subsid were prepared incorrectly as at December 31 and are shown in the table given below. The following items were overlooked when the statements were prepared: The Year 5 gain on sale of assets resulted from the subsidiary selling equipment to the parent on September 30. The parent immediately leased the equipment back to the subsidiary at an annual rental of $25,200. This was the only intercompany rent transaction that occurred each year. The equipment had a remaining life of five years on the date of the intercompany sale. The Year 6 gain on sale of assets resulted from the January 1 sale of a building, with a remaining life of seven years, by the subsidiary to the parent. Both gains were taxed at a rate of 40%. CONSOLIDATED INCOME STATEMENTS Year 5 Year 6 Miscellaneous revenues $ 805,000 $ 880,000 Gain on sale of assets 16.800 49.700

comparative staten subsid were prepared incorrectly as at December 31 and are shown in the table given below. The following items were overlooked when the statements were prepared: The Year 5 gain on sale of assets resulted from the subsidiary selling equipment to the parent on September 30. The parent immediately leased the equipment back to the subsidiary at an annual rental of $25,200. This was the only intercompany rent transaction that occurred each year. The equipment had a remaining life of five years on the date of the intercompany sale. The Year 6 gain on sale of assets resulted from the January 1 sale of a building, with a remaining life of seven years, by the subsidiary to the parent. Both gains were taxed at a rate of 40%. CONSOLIDATED INCOME STATEMENTS Year 5 Year 6 Miscellaneous revenues $ 805,000 $ 880,000 Gain on sale of assets 16.800 49.700

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The comparative consolidated income statements of a parent and its 75%-owned subsidiary were prepared incorrectly as at December 31 and are shown in the table given below. The following items were overlooked when the statements were prepared: The Year 5 gain on sale of assets resulted from the subsidiary selling equipment to the parent on September 30. The parent immediately leased the equipment back to the subsidiary at an annual rental of $25,200. This was the only intercompany rent transaction that occurred each year. The equipment had a remaining life of five years on the date of the intercompany sale. The Year 6 gain on sale of assets resulted from the January 1 sale of a building, with a remaining life of seven years, by the subsidiary to the parent. Both gains were taxed at a rate of 40%. CONSOLIDATED INCOME STATEMENTS Miscellaneous revenues $ 805,000 16,800 Gain on sale of assets Rental revenue Miscellaneous expenses Rental expense Depreciation expense Income tax expense Non-controlling interest Net income Miscellaneous revenues Miscellaneous expense Rent expense Depreciation expense Income tax expense Consolidated net income Required: Prepare correct consolidated income statements for Years 5 and 6. (Input all values as positive numbers. Leave no cells blank - be certain to enter zero wherever required. Omit $ sign in your response.) Parent Company Corrected Consolidated Income Statements Years 5 and 6 Attributable to: Year 5 Shareholders of Parent NCI Year 6 $ 880,000 49,700 6,300 25,200 828,100 954,900 408,600 494,540 60,400 67,600 86,000 88,400 86,500 100,000 38,000 6,480 679,500 757,020 $ 148,600 $ 197,880 Year 5 $ $ $ $ Year 6 $ $ $ $
Transcribed Image Text:The comparative consolidated income statements of a parent and its 75%-owned subsidiary were prepared incorrectly as at December 31 and are shown in the table given below. The following items were overlooked when the statements were prepared: The Year 5 gain on sale of assets resulted from the subsidiary selling equipment to the parent on September 30. The parent immediately leased the equipment back to the subsidiary at an annual rental of $25,200. This was the only intercompany rent transaction that occurred each year. The equipment had a remaining life of five years on the date of the intercompany sale. The Year 6 gain on sale of assets resulted from the January 1 sale of a building, with a remaining life of seven years, by the subsidiary to the parent. Both gains were taxed at a rate of 40%. CONSOLIDATED INCOME STATEMENTS Miscellaneous revenues $ 805,000 16,800 Gain on sale of assets Rental revenue Miscellaneous expenses Rental expense Depreciation expense Income tax expense Non-controlling interest Net income Miscellaneous revenues Miscellaneous expense Rent expense Depreciation expense Income tax expense Consolidated net income Required: Prepare correct consolidated income statements for Years 5 and 6. (Input all values as positive numbers. Leave no cells blank - be certain to enter zero wherever required. Omit $ sign in your response.) Parent Company Corrected Consolidated Income Statements Years 5 and 6 Attributable to: Year 5 Shareholders of Parent NCI Year 6 $ 880,000 49,700 6,300 25,200 828,100 954,900 408,600 494,540 60,400 67,600 86,000 88,400 86,500 100,000 38,000 6,480 679,500 757,020 $ 148,600 $ 197,880 Year 5 $ $ $ $ Year 6 $ $ $ $
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