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Preparing a consolidated income statement-Cost method with noncontrolling interest and AAP A parent company purchased a 90% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $280,000 in excess of the subsidiary's Stockholders' Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $200,000 and to an unrecorded Customer List valued at $80,000. The building asset is being depreciated over a 10-year period and the Customer List is being amortized over a 5-year period, both on the straight-line basis with no salvage value. During the current year, the subsidiary declared and paid $90,000 of dividends. The parent company uses the cost method of pre-consolidation investment bookkeeping. Each company reports the following income statement for the current year: Parent Subsidiary Income statement: Sales $11.000.000 $1,200,000 Cost of goods sold (7,400.000) (720.000) Gross profit 3.600.000 480.000 Income (loss) from subsidiary 81,000 Operating expenses (3.280.000) (352.000) Net income $401.000 $128.000 a. Starting with the parent's current-year pre-consolidation net income of $401,000, compute the amount of current-year net income attributable to the parent that will be reported in the consolidated financial statements. Do not use negative signs with your answers below. Reconciliation of Cost to Equity Method Parent's pre-consolidation net income %24 401000 v Dividend Income 81000 v P% x Net income of subsidiary P% x AAP amortization 0 x Net income attributable to controlling interest $ 0 x b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement Sales $ 12200000 v Cost of goods sold 8120000 v Gross profit 4080000 v Operating expenses

Preparing a consolidated income statement-Cost method with noncontrolling interest and AAP A parent company purchased a 90% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $280,000 in excess of the subsidiary's Stockholders' Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $200,000 and to an unrecorded Customer List valued at $80,000. The building asset is being depreciated over a 10-year period and the Customer List is being amortized over a 5-year period, both on the straight-line basis with no salvage value. During the current year, the subsidiary declared and paid $90,000 of dividends. The parent company uses the cost method of pre-consolidation investment bookkeeping. Each company reports the following income statement for the current year: Parent Subsidiary Income statement: Sales $11.000.000 $1,200,000 Cost of goods sold (7,400.000) (720.000) Gross profit 3.600.000 480.000 Income (loss) from subsidiary 81,000 Operating expenses (3.280.000) (352.000) Net income $401.000 $128.000 a. Starting with the parent's current-year pre-consolidation net income of $401,000, compute the amount of current-year net income attributable to the parent that will be reported in the consolidated financial statements. Do not use negative signs with your answers below. Reconciliation of Cost to Equity Method Parent's pre-consolidation net income %24 401000 v Dividend Income 81000 v P% x Net income of subsidiary P% x AAP amortization 0 x Net income attributable to controlling interest $ 0 x b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement Sales $ 12200000 v Cost of goods sold 8120000 v Gross profit 4080000 v Operating expenses

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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Preparing a consolidated income statement-Cost method with noncontrolling interest and AAP A parent company purchased a 90% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $280,000 in excess of the subsidiary's Stockholders' Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $200,000 and to an unrecorded Customer List valued at $80,000. The building asset is being depreciated over a 10-year period and the Customer List is being amortized over a 5-year period, both on the straight-line basis with no salvage value. During the current year, the subsidiary declared and paid $90,000 of dividends. The parent company uses the cost method of pre-consolidation investment bookkeeping. Each company reports the following income statement for the current year: Parent Subsidiary Income statement: Sales $11,000,000 $1,200,000 Cost of goods sold (7,400.000) (720.000) Gross profit 3.600.000 480.000 Income (loss) from subsidiary 81.000 Operating expenses (3.280.000) (352.000) Net income $401.000 $128.000 a. Starting with the parent's current-year pre-consolidation net income of $401,000, compute the amount of current-year net income attributable to the parent that will be reported in the consolidated financial statements. Do not use negative signs with your answers below. Reconciliation of Cost to Equity Method Parent's pre-consolidation net income 401000 v Dividend Income 81000 v P% x Net income of subsidiary P% x AAP amortization Net income attributable to controlling interest $ b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement Sales $ 12200000 v Cost of goods sold 8120000 v Gross profit 4080000 v Operating expenses 0 x blot incomo >> x| :
Transcribed Image Text:Preparing a consolidated income statement-Cost method with noncontrolling interest and AAP A parent company purchased a 90% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $280,000 in excess of the subsidiary's Stockholders' Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $200,000 and to an unrecorded Customer List valued at $80,000. The building asset is being depreciated over a 10-year period and the Customer List is being amortized over a 5-year period, both on the straight-line basis with no salvage value. During the current year, the subsidiary declared and paid $90,000 of dividends. The parent company uses the cost method of pre-consolidation investment bookkeeping. Each company reports the following income statement for the current year: Parent Subsidiary Income statement: Sales $11,000,000 $1,200,000 Cost of goods sold (7,400.000) (720.000) Gross profit 3.600.000 480.000 Income (loss) from subsidiary 81.000 Operating expenses (3.280.000) (352.000) Net income $401.000 $128.000 a. Starting with the parent's current-year pre-consolidation net income of $401,000, compute the amount of current-year net income attributable to the parent that will be reported in the consolidated financial statements. Do not use negative signs with your answers below. Reconciliation of Cost to Equity Method Parent's pre-consolidation net income 401000 v Dividend Income 81000 v P% x Net income of subsidiary P% x AAP amortization Net income attributable to controlling interest $ b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement Sales $ 12200000 v Cost of goods sold 8120000 v Gross profit 4080000 v Operating expenses 0 x blot incomo >> x| :
Do not use negative signs with your answers below. Reconciliation of Cost to Equity Method Parent's pre-consolidation net income 401000 v Dividend Income 81000 v P% x Net income of subsidiary P% x AAP amortization 0 x Net income attributable to controlling interest $ 0 x b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement Sales $ 12200000 v Cost of goods sold 8120000 v Gross profit 4080000 v Operating expenses 0 x Net income Net income attributable to noncontrolling interests 0 x Net income 0 x
Transcribed Image Text:Do not use negative signs with your answers below. Reconciliation of Cost to Equity Method Parent's pre-consolidation net income 401000 v Dividend Income 81000 v P% x Net income of subsidiary P% x AAP amortization 0 x Net income attributable to controlling interest $ 0 x b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement Sales $ 12200000 v Cost of goods sold 8120000 v Gross profit 4080000 v Operating expenses 0 x Net income Net income attributable to noncontrolling interests 0 x Net income 0 x
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