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 Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses Net income Income (loss) from subsidiary $7,500,000 $1,125,000 (5,250,000) (675,000) 2,250,000 450,000 126,000 (1,425,000) $951,000 0 a. Compute the income (loss) from subsidiary of $126,000 reported by the parent company. Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses (292,500) $157,500 b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers. Consolidated Income Statement S 0 $ 0 0 0 0 0 0 0 0
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- Downstream sales that remained unsold by the subsidiary as of the year-end A.will decrease both consolidated net income attributable to parent and consolidated netincome attributable to non-controlling interest for the current yearB.will increase consolidated net income attributable to parent for the current year.C.will decrease consolidated net income attributable to parent for the current year.D.will increase both consolidated net income attributable to parent and consolidated netincome attributable to non-controlling interest for the current year.Computing the amount of equity income and preparing [I] consolidation journal entries Assume that a wholly owned subsidiary sells inventory to the parent company. The parent company, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2012 and 2013: Subsidiary Intercompany Net Inventory Sales Income 2013 $500,000 2012 $400,000 $75,000 $50,000 Description [cogs] Investment in subsidiary Cost of goods sold [sales] Sales Gross Profit % Assume that inventory not remaining at the end of the year was sold outside of the consolidated group during the year. Assume the parent company uses the full equity method to account for its subsidiary. Cost of goods sold [lcogs] Cost of goods sold Inventory [pay] Accounts payable 30% a. How much Equity Income should the parent report in its pre-consolidation income statement the year ending 2013 assuming that it uses the equity method of accounting for its Equity…Do not use negative signs with your answers below. Reconciliation of Cost to Equity Method Parent's pre-consolidation net income 401000 v Dividend Income 81000 v P% x Net income of subsidiary P% x AAP amortization 0 x Net income attributable to controlling interest $ 0 x b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement Sales $ 12200000 v Cost of goods sold 8120000 v Gross profit 4080000 v Operating expenses 0 x Net income Net income attributable to noncontrolling interests 0 x Net income 0 x
- A.Selected information from the separate and consolidated income statements of CHARTER LTD. and as subsidiary, MEMBER INC. for the year ended December 31, 2021 are as follows: |CHARTER LTD. P600,000 Consolidated P924,000 693,000 MEMBER INC. Sales P420,000 330,000 P 90,000 COGS 450,000 | Gross profit P150,000 P231,000 During 2021, CHARTER LTD. sold goods to MEMBER INC. at the same mark-up on cost that CHARTER LTD. uses for all sales. At December 31, 2021, MEMBER INC. had not paid all of these goods and still held 37.5% of them in inventory. Compute for the original cost of goods in MEMBER INC.'s inventory acquired from Apple.What percentage of the intercompany loss on plant asset sale should be used to adjust consolidated net income? A. Parent’s percentage of ownership of subsidiary on both downstream and upstream sales B. 100% on downstream sales and Parent’s percentage of ownership of subsidiary on upstream sales C. Not applicable D. 100% on both downstream and upstream salesWhat percentage of the intercompany loss on plant asset sale should be used to adjust consolidated net income? a.100% on both downstream and upstream sales b.Not applicable c. Parent’s percentage of ownership of subsidiary on both downstream and upstream sales d. 100% on downstream sales and Parent’s percentage of ownership of subsidiary on upstream sales
- Gardner Corp. owns 80% of the voting common stock of Lockhart Co. Lockhart owns 70% of Canning Co. Gardner and Lockhart both use the initial value method to account for their investments. The following information is available from the financial statements and records of the three companies: Separate company net income before investment income Dividend income from investment in subsidiary Deferral of intra-entity gains Amortization expense related to excess fair value over book value of investment Gardner Lockhart Canning Co. Co. $900,000 $650,000 $150,000 Corp. 250,000 120,000 110,000 80,000 20,000 40,000 25,000 Separate company net income includes Intra-entity gains before the consolidating deferral but does not include dividend income from investment in subsidiary. What amount of dividends should Gardner Corp. recognize in its consolidated net income with respect to dividends received from Canning Co.?ProForm acquired 60 percent of ClipRite on June 30, 2020, for $1,020,000 in cash. Based on ClipRite's acquisition-date fair value, an unrecorded intangible of $600,000 was recognized and is being amortized at the rate of $15,000 per year. No goodwill was recognized in the acquisition. The noncontrolling interest fair value was assessed at $680,000 at the acquisition date. The 2021 financial statements are as follows: Sales Cost of goods sold Operating expenses Dividend income Net income Retained earnings, 1/1/21 Net income Inventory Investment in ClipRite Fixed assets Accumulated depreciation Totals Liabilities Dividends declared Retained earnings, 12/31/21 Cash and receivables $ Common stock Retained earnings, 12/31/21 Totals ProForm Sales Cost of Goods Sold (990,000) $ 630,000 290,000 (24,000) $ (94,000) $ (290,000) (94,000) 290,000 $(2,204,000) $(2,400,000) $(1,040,000) (290,000) 40,000 ClipRite 1,020,000 1,800,000 (980,000) $(1,290,000) 590,000 $ 490,000 480,000 890,000 (2,204,000)…In the years subsequent to the year of sale of a 90% owned subsidiary who sells equipment to its parent company at a gain, the non-controlling interest in consolidated income is computed by multiplying the non-controlling interest percentage by the subsidiary’s reported income: A. After adding intercompany gain considered realized in that period. B. After adding the intercompany gain on sales C. After deducting the intercompany gain on sales D. After deducting intercompany gain considered realized in that period.
- A parent company regularly sells merchandise to its 70%-owned subsidiary. Which of the following statements describes the computation of noncontrolling interest share? A. (The subsidiary's net income × 30%) + unrealized profits in the beginning inventory - unrealized profits in the ending inventory B. (The subsidiary's net income + unrealized profits in the ending inventory - unrealized profits in the beginning inventory) × 30% C. (The subsidiary's net income + unrealized profits in the beginning inventory - unrealized profits in the ending inventory) × 30% D. The subsidiary's net income times 30%On January 1, 2012, Aspen Company acquired 80 percent of Birch Company's outstanding voting stock for $438,000. Birch reported a $457,500 book value and the fair value of the noncontrolling interest was $109,500 on that date. Also, on January 1, 2013, Birch acquired 80 percent of Cedar Company for $200,000 when Cedar had a $205,000 book value and the 20 percent noncontrolling interest was valued at $50,000. In each acquisition, the subsidiary's excess acquisition-date fair over book value was assigned to a trade name with a 30-year life. These companies report the following financial information. Investment income figures are not included. Sales: Aspen Company Birch Company Cedar Company Expenses: Aspen Company Birch Company Cedar Company Dividends declared: Aspen Company Birch Company Cedar Company 2012 $ 632,500 261,250 Not available $ 542,500 200,000 Not available $15,000 8,000 Not available 2013 2014 $747,500 327,250 $822,500 416,900 185,900 292,600 $522,500 $750,000 261,000…In a mid-year purchase when the subsidiary’s books are not closed until the end of the year, the purchase income account contains the parent’s share of theA. Subsidiary’s income earned from the beginning of the year to the date of acquisition.B. Subsidiary’s income earned from the date of acquisition to the end of the year.C. Consolidated net income.D. Subsidiary’s income earned for the entire year