Question

Separate income statements of quail corp and its 80% owned subsidiary, Savannah corp, for 2016 are as follows:

Quail Savannah

sales rev 800,000 300,000

gain on equipment 35,000

cost of sales (400000) (160000)

other expenses (265000) (60000)

separate incomes 135000 115000

addiitonal information:

1. quail acquired its 80% interest in savannah corporation when the book values were equal to the fair values.

2. the gain on equipment relates to eqiupment with a book value of 85000 and a 7yr remaining useful life that svannah sold to quail for 120,000 on jan 1 2016. straight line depreciaiton method is used

required:

prepare a consolidated income statement for quail corp and subsidiary for the year 2016 by preparing a consolidated wokrsheet

please show all work

Answer 1

Consolidated income statement of Quail Corporation and Subsidiary for the year 2016:-
	Particular	Amount in $
	Sales Revenue(800,000+300,000)	$1,100,000
	Less: Cost of Sales(400,000+160,000)	-$560,000
	Less: Other expenses(265,000+60,000-5,000)	-$320,000
	Total Income	$220,000
	Less: Share of Minority Interest***	-$16,000
	Consolidated Net Income	$204,000

Working Note

Inter company adjustments to be made;-

Inter company profits elimiantion = Gain on sale of equipment = $35,000

Straight line depreciation on additional value = ($120,000-$85,000)/7years= $5000

Attributable to:-

Group(Balance) = $320,000- $16,000 =$304,000

***Non controlling interest(minority interest) = ($115,000-$35,000)*20% = $16000