On January 1, 20X7, Servant Company purchased a machine with an expected economi
ID: 2540759 • Letter: O
Question
On January 1, 20X7, Servant Company purchased a machine with an expected economic life of five years. On January 1, 20X9, Servant sold the machine to Master Corporation and recorded the following entry:
Cash 45,000
Accumulated Depreciation 28,000
Machine 70,000
Gain on Sale of Equipment 3,000
Master Corporation holds 75 percent of Servant's voting shares. Servant reported net income of $50,000, and Master reported income from its own operations of $100,000 for 20X9. There is no change in the estimated economic life of the equipment as a result of the intercorporate transfer.
Required:
Based on the preceding information, in the preparation of the 20X9 consolidated balance sheet, what is the balance of machine?
Based on the preceding information, what will be the income assigned to the noncontrolling interest in the 20X9 consolidated income statement?
Based on the preceding information, what is consolidated net income for 20X9?
Explanation / Answer
Ans. (1) In Consolidated Balance Sheet of 2019,
Gross Value 70000
Less: Accumulated Depreciation 42000 (28000+14000 dep for 2019)
Net value 28000
Note: Company follows SLM as 70000/5 = 14000 depreciation for a year and so dep for 2017 & 2018 is 28000.
(2) Income for Non-Controlling Interest in 2019 CFS = $ 50000*25%
= $ 12500 NCI Share @ 25%
NCI will be entitled to there share of interest in gain on sale of asset.
(3) Consolidated Net Income for 2019=
Consolidated Income ( $ 50000+$ 100000 ) = $150000
Less:( Intercorporate Profit on sale of asset = $ 3000
recognised by subsidiary i.e servant co.) = $ 120000
Note- It is assumed that Master Income from own operations is before recognising loss on sale of asset.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.