Question

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 Income (loss) from subsidiary of $126,000 reported by the parent company.  

AnswerNet incomeNet income attributable to noncontrolling interestsNet income attributable to parentNet income of subsidiaryParent's ownership percentage	Answer
AnswerNet incomeNet income attributable to noncontrolling interestsNet income attributable to parentNet income of subsidiaryParent's ownership percentage	Answer	%
Income (loss) from subsidiary	Answer

b. Prepare the consolidated income statement for the current year.

Do not use negative signs with your answers.

Consolidated Income Statement
Sales	Answer
Cost of goods sold	Answer
Gross profit	Answer
Income (loss) from subsidiary	Answer
Operating expenses	Answer
AnswerNet incomeNet income attributable to noncontrolling interestsNet income attributable to parentNet income of subsidiary	Answer
AnswerNet incomeNet income attributable to noncontrolling interestsNet income attributable to parentNet income of subsidiary	Answer
AnswerNet incomeNet income attributable to noncontrolling interestsNet income attributable to parentNet income of subsidiary	Answer

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Answer 1

a . Calculation of controlling interest and non-controlling interest
Income statement:	Parent	Subsidiary	Controlling interest	Non-controlling interest
Sales	75,00,000.00	11,25,000.00	9,00,000.00	2,25,000.00
Cost of goods sold	(52,50,000.00)	(6,75,000.00)	(5,40,000.00)	(1,35,000.00)
Gross profit	22,50,000.00	4,50,000.00	3,60,000.00	90,000.00
Income (loss) from subsidiary	1,26,000.00	-	-	-
Operating expenses	(14,25,000.00)	(2,92,500.00)	(2,34,000.00)	(58,500.00)
Net income	9,51,000.00	1,57,500.00	1,26,000.00	31,500.00
b. Consolidated income statement
Income statement:
Particulars	Amount
Sales	86,25,000.00
Cost of goods sold	(59,25,000.00)
Gross profit	27,00,000.00
Operating expenses	(17,17,500.00)
Net income	9,82,500.00
Attributable to controlling interest	9,51,000.00
Attributable to non- controlling interest	31,500.00