Question

H Co. has controlling interests in three subsidiaries, as shown in the data below:
K Co. had items in its inventory on January 1, Year 5, on which L Co. had made a profit of $5,000. J Co. had items in its inventory on December 31, Year 5, on which K Co. had made a profit of $8,000. J Co. rents premises from L Co. at an annual rental of $8,500. The parent company has no income (other than from its investments) and no expenses. It uses the equity method of recording its investments but has made no entries during Year 5. Assume a 40% tax rate.
Required:
Prepare the following related to its investments:
(a) Entries that H Co. would make in Year 5.
(b) A calculation of consolidated retained earnings, January 1, Year 5.
(c) A calculation of consolidated profit attributable to shareholders of H Co. for Year 5.


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  • CreatedJune 08, 2015
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