Preparing a consolidated income statement - with noncontrolling interest, but no AAP or intercompany profits A parent company purchased an 80% interest in its subsidiary several years ago with no AAP (i.e., purchased at book value). Each reports the following income statement for the current year. Parent Subsidiary Income statement: Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses Net income Income (loss) from subsidiary $7,500,000 $1,125,000 (5,250,000) (675,000) 2,250,000 450,000 126,000 (1,425,000) $951,000 0 a. Compute the income (loss) from subsidiary of $126,000 reported by the parent company. Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses (292,500) $157,500 b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers. Consolidated Income Statement S 0 $ 0 0 0 0 0 0 0 0

Preparing a consolidated income statement - with noncontrolling interest, but no AAP or intercompany profits A parent company purchased an 80% interest in its subsidiary several years ago with no AAP (i.e., purchased at book value). Each reports the following income statement for the current year. Parent Subsidiary Income statement: Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses Net income Income (loss) from subsidiary $7,500,000 $1,125,000 (5,250,000) (675,000) 2,250,000 450,000 126,000 (1,425,000) $951,000 0 a. Compute the income (loss) from subsidiary of $126,000 reported by the parent company. Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses (292,500) $157,500 b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers. Consolidated Income Statement S 0 $ 0 0 0 0 0 0 0 0

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-Equity method with noncontrolling interest and AAP A parent company purchased a 65% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $750,000 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 $450,000 and to an unrecorded patent valued at $300,000. The building asset is being depreciated over a 20-year period and the patent is being amortized over a 10-year period, both on the straight-line basis with no salvage value. During the current year, the subsidiary declared and paid $120,000 of dividends. The parent company uses the equity method of pre-consolidation investment bookkeeping. Each company reports the following income statement for the current year: Income statement: Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating…
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