Parent Co. Acquired 80% of subsidiary Co. for $300,000. On January 1, 2012 when
ID: 2542999 • Letter: P
Question
Parent Co. Acquired 80% of subsidiary Co. for $300,000. On January 1, 2012 when subsidiary’s book value was $280,000. The subsidiary stock was not actively traded. On the date of acquisitions, Subsidiary had equipment (with a 10 year life) that was undervalued in the financial records by $95,000. One year later, the following selected figures were reported by the two companies (stockholders’ equity account have been omitted). Additionally, no dividends have been paid.
---------------------------------------------Parent……………….Subsidiary
---------------------------------------------Book Value…………Book value
Current assets & investment…. 640,000……………..180,000
Buildings………………………… 150,000……………..120,000
Equipment………………………...200,000……………..110,000
Liabilities…………………………(120,000)……….....…(30,000)
Revenues………………….……..(900,000)……………(350,000)
Expenses………………………….600,000……………..250,000
Investment income……………..Not given
e. What is the consolidated total for equipment (net) at December 31?
f. What is the consolidated total for buildings?
Explanation / Answer
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e Equipment: Parent 200000 Subsidiary (110000+95000)*80% 164000 Gross 364000 Less Depreciation of 95000 (95000/10)*80% 7600 Net Equipment 356400 f Building: Parent 150000 Subsidiary (120000)*80% 96000 Consolidated Building 246000Related Questions
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