Preparing a consolidated income statementCost method with noncontrolling interest and AAP

A parent company purchased a 75% controlling interest in its subsidiary several years ago. The aggregate fair value of the controlling and noncontrolling interest was $648,000 in excess of the subsidiarys Stockholders Equity on the acquisition date. This excess was assigned to a building that was estimated to be undervalued by $360,000 and to an unrecorded Customer List valued at $288,000. The building asset is being depreciated over a 15-year period and the Customer List is being amortized over a 4-year period, both on the straight-line basis with no salvage value. During the current year, the subsidiary declared and paid $160,000 of dividends. The parent company uses the cost method of pre-consolidation investment bookkeeping. Each company reports the following income statement for the current year:

	Parent	Subsidiary
Income statement:
Sales	$9,600,000	$2,080,000
Cost of goods sold	(6,720,000)	(1,152,000)
Gross profit	2,880,000	928,000
Income (loss) from subsidiary	120,000	0
Operating expenses	(1,824,000)	(563,200)
Net income	$1,176,000	$364,800

a. Starting with the parents current-year pre-consolidation net income of $1,176,000, compute the amount of current-year net income attributable to the parent that will be reported in the consolidated financial statements.

Do not use negative signs with your answers below.

Reconciliation of Cost to Equity Method
Parent's pre-consolidation net income
Dividend Income
P% x Net income of subsidiary
P% x AAP amortization
Net income attributable to controlling interest

b. Prepare the consolidated income statement for the current year.

Do not use negative signs with your answers below.

Consolidated Income Statement
Sales
Cost of goods sold
Gross profit
Operating expenses
Net income
Net income attributable to noncontrolling interests
Net income attributable to the parent