Question

The following information is available concerning transactions between a parent and its wholly-owned subsidiary for the current year. The parent sells merchandise to the subsidiary at a markup of 20% on cost. The subsidiary’s beginning inventory includes $30,000 purchased from the parent, and its ending inventory includes $42,000 purchased from the parent. Total sales from the parent to the subsidiary were $800,000. The subsidiary sold plant assets to the parent in a prior year, charging the parent $650,000. The plant assets had been reported on the subsidiary’s books at a net book value of $350,000. The plant assets had a remaining life of 10 years at the time of the transaction, straight-line, and the transaction occurred 3 years ago. Required Compute equity in net income of the subsidiary, reported on the parent’s books, for the current year. The parent uses the complete equity method, the subsidiary reports net income of $60,000 on its own books, and revaluation write-offs consist of goodwill impairment of $15,000. = Subsidiary Reported Net Income = Goodwill Impairment Loss (if any) = Beginning Inventory Profit Confirmed (if any) = Ending Inventory Profit Unconfirmed (if any) = Confirmed Gain on Sale Plant Assets (if any) = Equity in Net Income

Answer 1