Assume that a parent company sells inventory to its wholly owned subsidiary. The subsidiary, ulti- mately,...

 

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Assume that a parent company sells inventory to its wholly owned subsidiary. The subsidiary, ulti- mately, sells the inventory to customers outside of the consolidated group. You have compiled the fol- lowing data for the years ending 2015 and 2016: 2016.. 2015 .. Subsidiary Intercompany Net Income Inventory Sales Gross Profit on Unsold Inventories Receivable (Payable) $150,000 $100,000 $20,000 $7,000 $ 7,500 $25,000 $9,000 $14,000 Assume that inventory not remaining at the end of the year was sold outside of the consolidated group. The subsidiary paid $80,000 in dividends during 2016. a. How much Income (loss) from subsidiary should the parent report in its pre-consolidation income statement the year ending 2016 assuming that it uses the equity method of accounting for its Equity Investment? b. Prepare the required [I] consolidation entries for 2016. Assume that a parent company sells inventory to its wholly owned subsidiary. The subsidiary, ulti- mately, sells the inventory to customers outside of the consolidated group. You have compiled the fol- lowing data for the years ending 2015 and 2016: 2016.. 2015 .. Subsidiary Intercompany Net Income Inventory Sales Gross Profit on Unsold Inventories Receivable (Payable) $150,000 $100,000 $20,000 $7,000 $ 7,500 $25,000 $9,000 $14,000 Assume that inventory not remaining at the end of the year was sold outside of the consolidated group. The subsidiary paid $80,000 in dividends during 2016. a. How much Income (loss) from subsidiary should the parent report in its pre-consolidation income statement the year ending 2016 assuming that it uses the equity method of accounting for its Equity Investment? b. Prepare the required [I] consolidation entries for 2016.