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

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

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter14: Intercorporate Investments In Common Stock

Section: Chapter Questions

Problem 20E

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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…
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