Dunker Company purchases an 80 interest in the common stock
Dunker Company purchases an 80% interest in the common stock of Fennig Company for $850,000 on January 1, 2017. The fair value of the NCI is $212,500. At the time of the purchase, the total stockholders’ equity of Fennig is $968,750.
The price paid is $75,000 in excess of the book value of the controlling portion of Fennig equity. The excess is attributed to a patent with a 10-year life. During 2019, Dunker Company and Fennig Company report the following internally generated income before taxes:
Fennig Company sells goods to Dunker Company for $50,000. Dunker Company has $20,000 of Fennig Company’s goods in its beginning inventory and $6,000 of Fennig’s goods in it sending inventory. Fennig Company sells goods to Dunker Company ata gross profit of 40%.
Dunker Company sells a new machine to Fennig Company on January 1, 2019, for $30,000. The machine has a 5-year life, and its cost is $25,000. The companies file separate tax returns. Both are subject to a 30% tax rate. Dunker receives an 80% dividend deduction.
Prepare a consolidated income statement for 2019. Include income distribution schedules for both companies.
Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
Relevant Tutors available to help