Preparing a consolidated income statement-Equity method with noncontrolling interest and AAP A pa… 1 answer below »

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Preparing a consolidated income statement-Equity method with noncontrolling interest and AAP A parent company purchased a 65% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $250,000 in excess of the subsidiarys Stockholders Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $150,000 and to an unrecorded patent valued at $100,000. The building asset is being depreciated over a 20-year period and the patent is being amortized over a 10-year period, both on the straight- line basis with no salvage value. During the current year, the subsidiary declared and paid $40,000 of dividends. The parent company uses the equity method of pre-consolidation investment bookkeeping. Each company reports the following income statement for the current year Parent subsidiary Income statement: $6,000,000 $600,000 Sales Cost of goods sold (4,200,000) 360,000) Gross profit 1,800,000 240,000 Income (loss) from subsidiary 43,225 1,140,000 156,000) operating expenses $703,225 $84,000 Net income

Preparing a consolidated income statement-Equity method with noncontrolling interest and AAP A parent company purchased a 65% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $250,000 in excess of the subsidiary’s Stockholders’ Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $150,000 and to an unrecorded patent valued at $100,000. The building asset is being depreciated over a 20-year period and the patent is being amortized over a 10-year period, both on the straight- line basis with no salvage value. During the current year, the subsidiary declared and paid $40,000 of dividends. The parent company uses the equity method of pre-consolidation investment bookkeeping. Each company reports the following income statement for the current year Parent subsidiary Income statement: $6,000,000 $600,000 Sales Cost of goods sold (4,200,000) 360,000) Gross profit 1,800,000 240,000 Income (loss) from subsidiary 43,225 1,140,000 156,000) operating expenses $703,225 $84,000 Net income

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