S Company is an 80 percent owned subsidiary of P Corp. Excess at the time of acquisition
Question:
S Company is an 80 percent owned subsidiary of P Corp. Excess at the time of acquisition only pertains to goodwill. The separate statements of comprehensive income of the two companies for 2011 are as follows:
P | S | |
Sales | 350,000 | 150,000 |
Cost of Goods Sold | (200,000) | (105,000) |
Gross Profit | 150,000 | 45,000 |
Operating Expenses | (60,000) | (15,000) |
Other Income | 10,000 | 5,000 |
Operating Income | 100,000 | 35,000 |
Dividend Income | 20,000 | - |
Comprehensive Income | 120,000 | 35,000 |
The following data apply in 2011:
S Company sold 90,000 of goods to P Corp. The gross profits on sales to P and to unrelated companies are equal and have not changed from the previous years.
P Corp. held 30,000 of the goods purchased from S in its beginning inventory and 20,000 of such goods in ending inventory.
On August 31, 2011. Park sold a machinery costing 150,000 to S for 126,000. At this date, the machinery had accumulated depreciation of 45,000. Both companies depreciate their machinery for 10 years with no salvage value.
Questions:
1. The machinery in the intercompany transfer should have a net book value in the 2011 consolidated statements amounting to:
2. The net adjustments to the accumulated depreciation on machineries in the 2011 consolidated working paper amounts to:
3. The amount to be reported as consolidated net income for 2011 will be:
Applied Statistics in Business and Economics
ISBN: 978-0073521480
4th edition
Authors: David Doane, Lori Seward