The unsold inventory at the end of a given year is sold to unaffiliated entities outside of the consolidated group during the next year. The parent uses the cost method of pre-consolidation Equity Investment bookkeeping. The balances of the subsidiary's retained earnings on December 31 of 2017, 2018 and 2019 were $200,500, $283,500 and $357,000, respectively. The subsidiary's net income for the year ended December 31, 2019 was $84,000. The subsidiary paid $1,000 and $10.500 for dividends in 2018 and 2019. The amount of income from subsidiary for year 2019 recorded on the parent company's pre-consolidation book. Select one: C a. 0 © O O b. 7500 x c. 13500 d. 10500 e. 4500
The unsold inventory at the end of a given year is sold to unaffiliated entities outside of the consolidated group during the next year. The parent uses the cost method of pre-consolidation Equity Investment bookkeeping. The balances of the subsidiary's retained earnings on December 31 of 2017, 2018 and 2019 were $200,500, $283,500 and $357,000, respectively. The subsidiary's net income for the year ended December 31, 2019 was $84,000. The subsidiary paid $1,000 and $10.500 for dividends in 2018 and 2019. The amount of income from subsidiary for year 2019 recorded on the parent company's pre-consolidation book. Select one: C a. 0 © O O b. 7500 x c. 13500 d. 10500 e. 4500
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The unsold inventory at the end of a given year is sold to unaffiliated entities outside of the consolidated group during the next year. The parent uses the cost method of pre-consolidation Equity Investment bookkeeping.
The balances of the subsidiary's retained earnings on December 31 of 2017, 2018 and 2019 were $200,500, $283,500 and $357,000, respectively. The subsidiary's net income for the year ended December 31, 2019 was $84,000. The
subsidiary paid $1,000 and $10.500 for dividends in 2018 and 2019.
The amount of income from subsidiary for year 2019 recorded on the parent company's pre-consolidation book
Select one:
O a. 0
O
0
O
b. 7500 *
c. 13500
d. 10500
e. 4500
Your answer is incorrect.
The correct answer is: 10500

Transcribed Image Text:A parent company acquired 100% of the stock of a subsidiary company on January 1, 2016, for $560,000. On this date, the balances of the subsidiary's stockholders' equity accounts were Common Stock, $35,000, Additional Paid-in
Capital, $38,500, and Retained Earnings, $136,500. On the acquisition date, the excess was assigned to the following AAP assets:
Original AmountOriginal Useful Life
10 years
8 years
8 years
Indefinite
Property, plant &
equipment
Customer list
Royalty agreement
Goodwill
$140,000
70,000
56,000
84,000
The Goodwill asset has not been found to be impaired.
The parent company started selling inventory to the subsidiary in 2018. The subsidiary, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2018
and 2019:
Inventory Gross Profit Remaining in Receivable
Sales
Unsold Inventory
(Payable)
2019 $42,000
$19,600
2018
$28,000
$10,500
$5,600
$7,350
The unsold inventory at the end of a given year is sold to unaffiliated entities outside of the consolidated group during the next year. The parent uses the cost method of pre-consolidation Equity Investment bookkeeping.
The balances of the subsidiary's retained earnings on December 31 of 2017, 2018 and 2019 were $200,500, $283,500 and $357,000, respectively. The subsidiary's net income for the year ended December 31, 2019 was $84,000. The
subsidiary paid $1,000 and $10,500 for dividends in 2018 and 2019.
The amount of income from subsidiary for year 2019 recorded on the parent company's pre-consolidation book.
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