Question

In: Accounting

Preparing a consolidated income statement—Cost method with noncontrolling interest, AAP and upstream intercompany depreciable asset profits...

Preparing a consolidated income statement—Cost method with noncontrolling interest, AAP and upstream intercompany depreciable asset profits
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 $322,000 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 $210,000 and to an unrecorded patent valued at $112,000. The building asset is being depreciated over a 12-year period and the patent is being amortized over an 8-year period, both on the straight-line basis with no salvage value. During a previous year, the subsidiary sold to the parent company a piece of depreciable property. The unconfirmed upstream gain on this intercompany transaction was $140,000 at the beginning of the current year. The upstream gain confirmed each year is $28,000. During the current year, the subsidiary declared and paid $105,000 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:

Income statement:

Sales $4,600,000 $1,750,000

Cost of goods sold (3,280,000) (1,078,000)

Gross profit 1,320,000 672,000

Income (loss) from subsidiary 94,5000

Operating expenses (960,000) (448,000)

Net income $454,500 $224,000

a. Starting with the parent’s current-year pre-consolidation net income of $454,500, compute the amount of current-year net income attributable to the parent that will be reported in the consolidated financial statements.

Reconciliation of Cost to Equity Method

Parent's pre-consolidation net income - ??

Dividend Income - ??

P% x Net income of subsidiary - ??

P% x AAP amortization - ??

P% of Upstream profit - ??

Net income attributable to controlling interest - ??

Prepare the consolidated income statement for the current year.

Sales - ??

COGS - ??

Gross Profit - ??

Operating Expenses - ??

Net Income - ??

Net Income attributable to noncontrolling interests - ??

Net income attributable to parent - ??

Please fill in the ?? blanks.

Solutions

Expert Solution


Related Solutions

Preparing a consolidated income statement—Equity method with noncontrolling interest, AAP and upstream intercompany depreciable asset profits...
Preparing a consolidated income statement—Equity method with noncontrolling interest, AAP and upstream intercompany depreciable asset profits A parent company purchased an 80% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $575,000 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 $375,000 and to an unrecorded Customer List valued at $200,000. The building asset...
Preparing a consolidated income statement - with noncontrolling interest, but no AAP or intercompany profits A...
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 $7,500,000 $1,125,000 Cost of goods sold (5,250,000) (675,000) Gross profit 2,250,000 450,000 Income (loss) from subsidiary 126,000 0 Operating expenses (1,425,000) (292,500) Net income $951,000 $157,500 a. Compute the...
Preparing a consolidated income statement—Equity method with noncontrolling interest, AAP and upstream and downstream intercompany inventory...
Preparing a consolidated income statement—Equity method with noncontrolling interest, AAP and upstream and downstream intercompany inventory profits A parent company purchased a 70% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $700,000 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 $400,000 and to an unrecorded patent valued at $300,000. The building asset...
Preparing a consolidated income statement—Equity method with noncontrolling interest, AAP and upstream and downstream intercompany inventory...
Preparing a consolidated income statement—Equity method with noncontrolling interest, AAP and upstream and downstream intercompany inventory profits A parent company purchased a 70% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $700,000 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 $400,000 and to an unrecorded patent valued at $300,000. The building asset...
Preparing a consolidated income statement—Cost method with noncontrolling interest and AAP A parent company purchased a...
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...
Preparing a consolidated income statement—Equity method with noncontrolling interest and AAP A parent company purchased a...
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...
Consolidation subsequent to date of acquisition—Equity method with noncontrolling interest, AAP, and upstream intercompany inventory sale...
Consolidation subsequent to date of acquisition—Equity method with noncontrolling interest, AAP, and upstream intercompany inventory sale Assume that, on January 1, 2010, a parent company acquired a 75% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $550,000 over the book value of the subsidiary’s Stockholders’ Equity on the acquisition date. The parent assigned the excess to the following [A] assets: [A] Asset Initial Fair Value Useful Life Patent $200,000 10 years Goodwill 350,000...
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a...
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a parent company acquires an 80% interest in its subsidiary for a purchase price of $3,724,800. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary’s Stockholders’ Equity is assigned to a building (in PPE, net) that the parent believes is worth $100,000 more than its book value, an: unrecorded Patent that the parent valued...
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a...
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a parent company acquires an 70% interest in its subsidiary for a purchase price of $1,078,000. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary’s Stockholders’ Equity is assigned to a building (in PPE, net) that is worth $100,000 more than its book value, an unrecorded patent that the parent valued at $200,000, and...
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a...
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a parent company acquires an 80% interest in its subsidiary for a purchase price of $620,800. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary's Stockholders' Equity is assigned to a building (in PPE, net) that the parent believes is worth $50,000 more than its book value, an: unrecorded Patent that the parent valued...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT