Equity investment accounting Assume on January 1, 2015, a parent company 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, 2017, the subsidiary purchased a building for $576,000. The building has a useful life of 8 years and is depreciated on a straight-line basis with no salvage value. On January 1, 2019, the subsidiary sold the building to the parent for $504,000. The parent estimated that the building has 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, 2019, the parent's "stand-alone" income (i.e., net income before recording any adjustments related to pre-consolidation investment accounting) is $600,000. The subsidiary's recorded net income is $120,000. Income from Equity investment (on parent’s pre-consolidations books preceding consolidation): $45,000 $102,000 $90,000 $30,000
Equity investment accounting
Assume on January 1, 2015, a parent company 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, 2017, the subsidiary purchased a building for $576,000. The building has a useful life of 8 years and is
Income from Equity investment (on parent’s pre-consolidations books preceding consolidation):
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