Parent Company P owns 70% of the outstanding shares of Subsidiary Company S. The following information is
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Question:
Parent Company P owns 70% of the outstanding shares of Subsidiary Company S. The following information is available for both companies:
Parent Company P:
- Net Income: $500,000
- Dividends Declared: $100,000
Subsidiary Company S:
- Net Income: $200,000
- Dividends Declared: $50,000
Additional Information:
- Parent Company P sold equipment with a carrying value of $80,000 to Subsidiary Company S at a gain of $20,000. The equipment has a remaining useful life of 5 years.
- Subsidiary Company S sold merchandise to Parent Company P at a markup of 25% on cost. The intra-group sale amounted to $150,000, and 40% of the merchandise remains in Parent Company P's inventory at the end of the year.
- Parent Company P has a 30% tax rate, and Subsidiary Company S has a 25% tax rate.
- Any excess acquisition cost is attributed to goodwill.
Calculate the consolidated net income, consolidated retained earnings, and the amount of goodwill recognized in the consolidated financial statements.
Related Book For
Advanced Accounting
ISBN: 978-0077431808
10th edition
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
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