Watson, Inc., purchased 60 percent of Houston, Inc., on January 1, 2008, for $400,000 in cash. On

Question:

Watson, Inc., purchased 60 percent of Houston, Inc., on January 1, 2008, for $400,000 in cash. On that date, assets and liabilities of the subsidiary had the following values:

On December 31, 2011, these two companies report the following figures:

Answer each of the following questions using the purchase method:
a. The parent shows a $36,400 balance as its Equity in Subsidiary Earnings. How was this balance calculated?
b. Is an adjustment to the parent€™s Retained Earnings as of January 1, 2011, needed? Why or why not?
c. How much total amortization expense should be recognized for consolidation purposes in 2011?
d. What is the noncontrolling interest in the subsidiary€™s net income?
e. Prepare a consolidated income statement.
f. What allocations were made as a result of the purchase price? What amount of each allocation remains at the end of 2011?
g. What is the December 31, 2011, amount in Noncontrolling Interest in the Subsidiary? What three components make up this total?
h. Prepare a consolidated balance sheet as of December 31,2011.

Consolidated Income Statement
When talking about the group financial statements the consolidated financial statements include Consolidated Income Statement that a parent must prepare among other sets of consolidated financial statements. Consolidated Income statement that is... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...