Question

Explain how the following items would affect consolidated net income in the year a subsidiary is purchased and in the year after:
a. Impairment of the value of goodwill.
b. Land with a carrying amount of $2,000,000 on the subsidiary's balance sheet on the date the subsidiary was purchased has a fair value of $5,000,000.
c. Equipment with a carrying amount of $1,000,000 on the subsidiary's balance sheet on the date the subsidiary was purchased has a fair value of $1,500,000. The equipment had a remaining useful life of five years on the date of acquisition.
d. Inventory with a carrying amount of $200,000 on the subsidiary's balance sheet on the date the subsidiary was purchased has a fair value of $230,000.
e. Dividends paid by the subsidiary to the parent.
f. Services sold at a profit by the subsidiary to the parent.
g. The subsidiary is 80 percent owned by the parent.



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  • CreatedFebruary 26, 2015
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