Question

Companies A, B, and C produce the following separate internally generated net incomes during 2015:
Company A acquires an 80% interest in Company B on January 1, 2012, and Company B acquires a 60% interest in Company C on January 1, 2013. Each investment is acquired at a price equal to the book value of the stock purchased. Additional information is as follows:
a. Company A purchases goods billed at $30,000 from Company C during 2015. The price includes a 40% gross profit. One-half of the goods are held in Company A’s year-end inventory.
b. Company B purchases goods billed at $30,000 from Company A during 2015. Company A always bills Company B at a price that includes a 30% gross profit. Company B has $6,000 of Company A goods in its beginning inventory and $2,400 of Company A goods in its ending inventory.
c. Company C purchases goods billed at $15,000 from Company B during 2015. Company B bills Company C at a 20% gross profit. At year-end, $7,500 of the goods remains unsold. The goods are inventoried at $5,000, under the lower-of-cost-or-market procedure.
d. Company B sells a machine to Company C on January 1, 2014, for $50,000. Company B’s cost is $70,000, and accumulated depreciation on the date of sale is $40,000. The machine is being depreciated on a straight-line basis over five years.
Required
Prepare the consolidated income statement for 2015, including the distribution of consolidated net income supported by distribution schedules.


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  • CreatedApril 13, 2015
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