Question

Parent Corporation purchased land from S1 Corporation for $220,000 on December 26, 20X8. This purchase followed a series of transactions between P-controlled subsidiaries. On February 15, 20X8, S3 Corporation purchased the land from a nonaffiliate for $160,000. It sold the land to S2 Company for $145,000 on October 19, 20X8, and S2 sold the land to S1 for $197,000 on November 27, 20X8. Parent has control of the following companies: Subsidiary Level of Ownership 2008 Net Income S3 80% $100,000 S2 70% $70,000 S1 90% $95,000 Parent reported income from its separate operations of $200,000 for 20X8. Based on the preceding information, what should be the amount of income assigned to the controlling shareholders in the consolidated income statement for 20X8? A. $369,400 B. $405,000 C. $465,000 D. $60,000

Answer 1

A. $369,400

		S1					S2					S3
Bought	1,97,000	Sold	2,20,000		Bought	1,45,000	Sold	1,97,000		Bought	1,60,000	Sold	1,45,000
Profit /(Loss) on sale of land	23,000				Profit /(Loss) on sale of land	52,000				Profit /(Loss) on sale of land	-15,000
Share to Parent Co on Sale of land	20,700				Share to Parent Co on Sale of land	36,400				Share to Parent Co on Sale of land	-12,000
Net profit	95,000				Net profit	70,000				Net profit	1,00,000
Share to Parent Co on total Profits	1				Share to Parent Co on total Profits	1				Share to Parent Co on total Profits	1
% amount to Parent Co on total Profits	85,500				% amount to Parent Co on total Profits	49,000				% amount to Parent Co on total Profits	80,000
Less: eliminate Inter co Share on Sale of land	-20,700				Less: eliminate Inter co Share on Sale of land	-36,400				Less: eliminate Inter co Share on Sale of land	12,000
Final amount to Parent Co	64,800				Final amount to Parent Co	12,600				Final amount to Parent Co	92,000
Total Share from Subsidiaries			1,69,400
Profit to Parent Co on standalone basis			2,00,000
Total Parent Co Profit attributable to controlling share holders			3,69,400