Question

2.Fields Company purchased a 70% interest in Mullen Company five years ago with no AAP (i.e., purchased at book value). Each reports the following income statement for the current year:

Income Statement
	Fields	Mullen
Sales	$7,800,000	$1,250,000
Cost of goods sold	(5,900,000)	(675,000)
Gross Profit	1,900,000	575,000
Income (loss) from subsidiary	206,500
Operating expenses	(1,650,000)	(280,000)
Net income	$   456,500	$   295,000

a. Compute the income (loss) from subsidiary of $206,500 reported by the Fields Company.
b. Prepare the consolidated income statement for the current year.

Answer 1

a. Compute the income (loss) from subsidiary of $206,500 reported by the Fields Company.
	Particulatrs	Amount
	Net income of the subsidary company	$295,000
	% of interest held by parent company	70%
	Income(loss) form subsidary ( $ 295,000 x 70% )	$206,500
b	Consolidated income statement
	Particulatrs	Amount ($)
	Sales revenue ( $ 7,800,000 + $ 1,250,000 )	9,050,000
	Less: Cost of goods sold ( $ 5,900,000 + $ 675,000)	(6,575,000)
	Gross profit	2,475,000
	Operating expenses ( $ 1,650,000 + $ 280,000 )	(1,930,000)
	Share of minority interest ( $ 295,000 x 30% )	(88,500)
	Net income	456,500