On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $330,000 in...

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $330,000 in cash. The equipment had originally cost $297,000 but had a book value of only $181,500 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense is computed using the straight-line method. Ackerman reported $430,000 in net income in 2018 (not including any investment income) while Brannigan reported $140,900. Ackerman attributed any excess acquisition-date fair value to Brannigan's unpatented technology, which was amortized at a rate of $5,300 per year.

a) What is consolidated net income for 2018?

b) What is the parent's share of consolidated net income for 2018 if Ackerman owns only 90 percent of Brannigan?

c) What is the parent's share of consolidated net income for 2018 if Ackerman owns only 90 percent of Brannigan and the equipment transfer was upstream?

d) What is the consolidated net income for 2019 if Ackerman reports $450,000 (does not include investment income) and Brannigan $152,200 in income? Assume that Brannigan is a wholly owned subsidiary and the equipment transfer was downstream.

Expert Solution

ekkarill92 answered 1 year ago

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $210,000 in...

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $210,000 in cash. The equipment had originally cost $189,000 but had a book value of only $115,500 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense is computed using the straight-line method. Ackerman reported $310,000 in net income in 2018 (not including any investment income) while Brannigan reported $101,300. Ackerman attributed any excess acquisition-date fair value to Brannigan's unpatented technology, which...

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $190,000 in...

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $190,000 in cash. The equipment had originally cost $171,000 but had a book value of only $104,500 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense is computed using the straight-line method. Ackerman reported $470,000 in net income in 2018 (not including any investment income) while Brannigan reported $154,100. Ackerman attributed any excess acquisition-date fair value to Brannigan's unpatented technology, which...

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $250,000 in...

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $250,000 in cash. The equipment had originally cost $225,000 but had a book value of only $137,500 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense is computed using the straight-line method. Ackerman reported $350,000 in net income in 2018 (not including any investment income) while Brannigan reported $114,500. Ackerman attributed any excess acquisition-date fair value to Brannigan's unpatented technology, which...

In January of 2019, a wholly owned subsidiary sold Equipment to the parent for a cash...

In January of 2019, a wholly owned subsidiary sold Equipment to the parent for a cash price of $122,500. The subsidiary had acquired the equipment at a cost of $140,000 and the estimated useful life when purchased was 10 years, and there was no salvage value. The subsidiary had depreciated the equipment for 4 years at the time of sale using the straight line method. The parent retained the depreciation policy of the subsidiary and depreciated the equipment over its...

On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for...

On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for $40,000. At the time of the transfer, the asset had an original cost (to Republic) of $60,000 and accumulated depreciation of $25,000. The equipment has a five year estimated remaining life. Barre reported net income of $250,000, $270,000 and $310,000 in 2020, 2021, and 2022, respectively. Republic received dividends from Barre of $90,000, $105,000 and $120,000 for 2020, 2021, and 2022, respectively. What was...

On January 1, Poe Corp. sold a machine for $4,798,243 to Saxe Corp., its wholly-owned subsidiary....

On January 1, Poe Corp. sold a machine for $4,798,243 to Saxe Corp., its wholly-owned subsidiary. Poe paid $1.1 million for this machine, which had accumulated depreciation of $250,000 on the sale date. Poe estimated a $100,000 salvage value and depreciated the machine on the straight-line basis over 20 years, a policy that Saxe continued. In Poe's December 31 consolidated balance sheet, the accumulated depreciation of this machine should be shown on the consolidated balance sheet as:

Larkin Hydraulics. On May 1, Larkin Hydraulics, a wholly owned subsidiary of Caterpillar (U.S.), sold a...

Larkin Hydraulics. On May 1, Larkin Hydraulics, a wholly owned subsidiary of Caterpillar (U.S.), sold a 12-megawatt compression turbine to RebeckeTerwilleger Company of the Netherlands for €4,000,000, payable as €2,000,000 on August 1 and €2,000,000 on November 1. Larkin derived its price quote of €4,000,000 on April 1 by dividing its normal U.S. dollar sales price of $4.320,000 by the then current spot rate of $1.0800/€. By the time the order was received and booked on May 1, the euro...

On May 1, Larkin Hydraulics, a wholly owned subsidiary of Caterpillar (U.S.), sold a 12-megawatt compression...

On May 1, Larkin Hydraulics, a wholly owned subsidiary of Caterpillar (U.S.), sold a 12-megawatt compression turbine to Rebecke-Terwilleger Company of the Netherlands for €4,000,000 payable on August 1. Larkin determined the €4,000,000 price tag on April 1 when the spot rate was $1.0800/€. By the time the order was received and booked on May 1, the euro strengthened to $1.100/€. Nevertheless, Larkin’s Director of Finance now wonders if the firm should hedge against a reversal of the recent trend...

16. Larkin Hydraulics. On May 1, Larkin Hydraulics, a wholly owned subsidiary of Caterpillar (U.S.), sold...

16. Larkin Hydraulics. On May 1, Larkin Hydraulics, a wholly owned subsidiary of Caterpillar (U.S.), sold a 12-megawatt compression turbine to Rebecke-Terwilleger Company of the Netherlands for €4,000,000, payable as €2,000,000 on August 1 and €2,000,000 on November 1. Larkin derived its price quote of €4,000,000 on April 1 by dividing its normal U.S. dollar sales price of $4.320,000 by the then current spot rate of $1.0800/€. By the time the order was received and booked on May 1, the...

McKinney Enterprises acquired Pottsboro, Inc. as a wholly-owned subsidiary on January 1, 2019 paying $1,750,000. The...

McKinney Enterprises acquired Pottsboro, Inc. as a wholly-owned subsidiary on January 1, 2019 paying $1,750,000. The $440,000 excess of cost over book value of Pottsboro’s net assets was partly attributable to a patent undervalued by $210,000. The patent has a 10-year life. The remaining excess is considered goodwill. The parent uses the cost method of pre-consolidation Equity investment bookkeeping. The separate financial statements of the two companies for 2022 are presented below. Neither company issued additional shares after the acquisition...

Question