Question

January 1, 2016 SOS company invested 2,000,000 $ for 80% of RAT company, in that date the fair value of RAT is equal to its book value except inventories was undervalued 40,000, equipment ( 5 years ) undervalued 60,000 ,6% 10 years bonds overvalued 30,000 and unrecorded patent 80,000 estimated 20 years’ useful life. The owner’s equity was $1,200,000 shares, 600,000 premiums and 400,000 as retained earnings, the following are selective information about the parent and its subsidiary:

1- The subsidiary reported net income for 2016was$100,000 and declared and paid $20000 dividend.

2- during 2017 the parent sold a land cost 200,000 for $220,000. The reported income for the subsidiary was 90,000 and 10,000 dividend

3- in 1/1/ 2018 the subsidiary sold an equipment for parent for 120,000 and net book value 110,000, five years remaining use life and during the year the parent sold goods for 250,000 including 25% markup, the subsidiary ending inventory include 60000$ inventory from parent, the subsidiary net income of 2018 was 120,000 and$30,000 6-

4- During 2019 the subsidiary sold goods with mark up 20% at cost 300,000, 25% of this inventory still in hand in 31/12/2019, the subsidiary sold the land that purchased from parent for 250,000. The subsidiary reported net income was 180,000 and 30,000 dividends was paid.

5- during 2020 the subsidiary sold goods with mark up 20% at cost 400,000, $96,000 at selling price of this goods still in hand in 31/12/2020. The subsidiary reported net income was 360,000 and 80,000 dividends was paid.

6- The parent retained earnings in 31/12/2015 1,800,000 $. Dividends and income without income from subsidiary during the years was: 2016 (income 500,000$ dividend 150,000), 2017 (income 300,000$, dividend 80,000), 2018 ( income200,000$), 2019 (350,000$ , dividend 50,000), 2020 ( income100,000$)

Required:

1- Prepare all the elimination entries during the years from 2016 to 2020.

2- Journalize the income and dividend under equity methods in parent’s book for the year 2020.

3- Complete the following table:

	2016	2017	2018	2019	2020
Controlling interest share
Consolidated income
Consolidated retained earning
Non-controlling share
Non-controlling of interest
investment
Unamortized amount

Answer 1