Brown Corporation owns 70 percent of the voting common stock of Transom Company. On January 1, 20X2, Transom paid $360,000 to purchase a building with an expected economic life of 15 years. Transom uses straight-line depreciation for all depreciable assets. On December 31, 20X7, Brown purchased the building from Transom for $180,000. Brown reported income, excluding Transom's investment income, of $135,000 and $150,000 for 20X7 and 20X8, respectively. Transom reported net income of $12,000 and $48,000 for 20X7 and 20X8, respectively.

Required:

a.	Prepare the necessary consolidation entry(s) to eliminate the effects of the intercompany sale of the building in preparing the consolidated financial statements for 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b.	Calculate the amount to be reported as consolidated net income for 20X7 and the income to be allocated to the controlling interest.

C.	Prepare the necessary consolidation entry(s) to eliminate the effects of the intercompany sale of the building in preparing the consolidated financial statements for 20X8. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answer to whole dollars.)

d.	Calculate the consolidated net income and the amount of profit allocated to the controlling shareholders in the consolidated income statement for 20X8. (Round your answer to whole dollars.)

Answer rating: 100% (QA)

a Consolidation entry for 20X7 To eliminate the effects of the intercompany sale of the building we ... View the full answer