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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 $12,000. 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 Gain on sale of assets Year 5 $ 750,000 8,000 Year 6 $ 825,000 42,000 Rental revenue 3,000 12,000 761,000 879,000 Miscellaneous expenses 399,800 492,340 Rental expense 52,700 64,300 Depreciation expense 75,000 80,700 Income tax expense Non-controlling interest Net income $ 120,000 737,000 $ 142,000 81,000 94,500 32,500 5,160 641,000 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 Year 5 Year 6 Miscellaneous revenues $ 750000 $ 825000 Miscellaneous expense 399800 492340 Rent expense 49700 52300 Depreciation expense 75000 80700 Income tax expense 74600 Consolidated net income $ $ Attributable to: Shareholders of Parent $ $ NCI $ es $

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 $12,000. 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 Gain on sale of assets Year 5 $ 750,000 8,000 Year 6 $ 825,000 42,000 Rental revenue 3,000 12,000 761,000 879,000 Miscellaneous expenses 399,800 492,340 Rental expense 52,700 64,300 Depreciation expense 75,000 80,700 Income tax expense Non-controlling interest Net income $ 120,000 737,000 $ 142,000 81,000 94,500 32,500 5,160 641,000 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 Year 5 Year 6 Miscellaneous revenues $ 750000 $ 825000 Miscellaneous expense 399800 492340 Rent expense 49700 52300 Depreciation expense 75000 80700 Income tax expense 74600 Consolidated net income $ $ Attributable to: Shareholders of Parent $ $ NCI $ es $

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 $12,000. 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 Gain on sale of assets Year 5 $ 750,000 8,000 Year 6 $ 825,000 42,000 Rental revenue 3,000 12,000 761,000 879,000 Miscellaneous expenses 399,800 492,340 Rental expense 52,700 64,300 Depreciation expense 75,000 80,700 Income tax expense Non-controlling interest Net income $ 120,000 737,000 $ 142,000 81,000 94,500 32,500 5,160 641,000
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 $12,000. 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 Gain on sale of assets Year 5 $ 750,000 8,000 Year 6 $ 825,000 42,000 Rental revenue 3,000 12,000 761,000 879,000 Miscellaneous expenses 399,800 492,340 Rental expense 52,700 64,300 Depreciation expense 75,000 80,700 Income tax expense Non-controlling interest Net income $ 120,000 737,000 $ 142,000 81,000 94,500 32,500 5,160 641,000
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 Year 5 Year 6 Miscellaneous revenues $ 750000 $ 825000 Miscellaneous expense 399800 492340 Rent expense 49700 52300 Depreciation expense 75000 80700 Income tax expense 74600 Consolidated net income $ $ Attributable to: Shareholders of Parent $ $ NCI $ es $
Transcribed Image Text: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 Year 5 Year 6 Miscellaneous revenues $ 750000 $ 825000 Miscellaneous expense 399800 492340 Rent expense 49700 52300 Depreciation expense 75000 80700 Income tax expense 74600 Consolidated net income $ $ Attributable to: Shareholders of Parent $ $ NCI $ es $
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