A parent sold a land to an 80% owned subsidiary at a loss. The subsidiary continue to use the land at the end of the year. What is the amount to be reported as consolidated net income for the end of the year? a. Parent separate books net income less 100% intercompany loss plus 100% subsidiary's separate books net incorne. b. Parent separate books net income plus intercompany loss c. Parent separate books net income plus 80% intercompany loss plus 80% subsidiary's separate books net income. d. Parent separate books net income plus 100% intercompany loss plus 100% subsidiary's separate books net income.

A parent sold a land to an 80% owned subsidiary at a loss. The subsidiary continue to use the land at the end of the year. What is the amount to be reported as consolidated net income for the end of the year? a. Parent separate books net income less 100% intercompany loss plus 100% subsidiary's separate books net incorne. b. Parent separate books net income plus intercompany loss c. Parent separate books net income plus 80% intercompany loss plus 80% subsidiary's separate books net income. d. Parent separate books net income plus 100% intercompany loss plus 100% subsidiary's separate books net income.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 15MCQ

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Parent Ltd (Parent) controls a subsidiary Sub Ltd (Sub), in which it owns 70 per cent of the issued capital since 30 June 20X3. The following transactions are relevant for the preparation of the consolidated financial statements for the financial year ending 30 June 20X7. Transaction 1: During the financial year ending 30 June 20X4, Sub sold an item of plant to Parent at a loss. Parent is still using the plant at 30 June 20X7. Transaction 2: Sub paid an interim dividend in August 20X5. Parent is exempt from income tax on dividends received from the subsidiary. Transaction 3: During the financial year ending 30 June 20X7, Parent sold inventory to Sub for a price greater than its cost to Parent. One-third of this inventory is still on hand at 30 June 20X7. Transaction 4: On 1 November 20X6, Parent borrowed $50 000 from Sub at an interest rate of 10 per cent per annum. The interest on the loan is payable every six months starting 1 May 20X7. The loan is still outstanding at 30 June…
Parent and its 80% owned Subsidiary report the following at December 31 of the current year: Parent Net Income, P100,000; Parent Dividends, P20,000, Parent Land, P500,000. Subsidiary Net Income, P80,000; Subsidiary Dividends, P10,000; Subsidiary Land, P300,000. On June 1, of the current year, Subsidiary sold land to Parent reporting a gain on sale of P10,000. The gain is included in the net income reported by the Subsidiary. 1. Determine the equity holders of parent’s net income and the non-controlling interest net income. 2. Determine the non-controlling interest net income.
On January 1, 20x6, Parent Corporation purchased 80% of Subsidiary Company's outstanding stock for P620,000. At that date, all of Subsidiary's assets and liabilities had market valu. approximately equal to their book valu. and no goodwill was includ. in the purchase price. The following information was available for 20x6: income from own operations of Parent, P150,000, operating loss of Subsidiary, P20,000. Dividends paid in 20x6 by Parent, P75,000; by Subsidiary to Parent, P12,000.1 On July 1, 20x6, there was a downstream sale of equipment at a gain of P25,000. The equipment is expected to have a remaining useful life of 10 years from the date of sale. Also, on January 1, 20x6, there was an upstream sale of furniture at a loss of P7,500. The furniture is expected to have a useful life of five years from the date of sale. Non-controlling interest is measured at fair value. How much is the consolidated net income attributable to the parent shareholders' equity?
In a mid-year purchase when the subsidiary's books are not closed until the end of the year, the consolidated net income contains the parent's share of the a. subsidiary's income earned for the entire year. b. subsidiary's income earned from the beginning of the year to the date of acquisition. c. subsidiary's income earned from the date of acquisition to the end of the year. d. dividends received from the subsidiary during the period of ownership.
True or false: When the parent acquired 100 percent of the subsidiary’s stock for book value during the current period, consolidated net income is always the sum of the parent’s net income and the subsidiary’s net income for the entire reporting period.
On January 1, 20X4, Parent Company purchased 90% of the common stock of Subsidiary Company for $360,000. On this date, Subsidiary had common stock, other paid in capital, and retained earnings of $20,000, $130,000, and $200,000 respectively. Any excess of cost over book value is due to goodwill. Parent account for the Investment in Subsidiary using the simple equity method. On July 1, 20X4, Subsidiary sold $100,000 par value of 9%, ten-year bonds for $106,755, which resulted in an effective interest rate of 8%. The bonds pay interest semi-annually on January 1 and July 1 of each year. Subsidiary uses the effective-interest method of amortizing the premium. An amortization table for 20X4 and 20X5 is presented below: Date Cash Int Interest Exp Premium Amort Premium Bal Carrying Value 7/1/X4 6,755 106,755 12/31/X4 4,500 4,270 230 6,525 106,525 7/1/X5 4,500 4,261 239 6,286 106,286 12/31/X5 4,500 4,251 249 6,037…
In the year an 80% owned subsidiary sells equipment to its parent company at a gain, the non-controlling interest in consolidated income is calculated by multiplying the non-controlling interest percentage by the subsidiary’s reported net income A. Plus the net amount of unrealized gain on the intercompany sale B. Plus the intercompany gain considered realized the current period C. Minus the intercompany gain considered realized in the current period. D. Minus the net amount of unrealized gain on the intercompany sales
A parent company owns 80% of the issued capital of its subsidiary. On consolidation, a sale of inventories between parent and subsidiary will be eliminated as follows Select one: A. 20% of the sale amount B. 80% of the sale amount C. 100% of the sale amount D. not eliminated
A partially owned subsidiary declared dividend and half remains unpaid by the end of the year, which of the following is CORRECT? A. The total amount of the dividend will be eliminated in the working paper elimination entry by debiting “dividend” account. B. Half of the amount of the dividend will be used to reduce the profit of the parent for consolidation purposes. C. The elimination entry will include a debit to non-controlling interest for the amount of dividend received by the non-controlling shareholders. D. The transaction will increase the balance of NCI at the end.
On 20 December 20x1, a Parent paid interest of $200,000 to its 80%-owned Subsidiary. The Subsidiary recognised the interest as income whilst the Parent recognised the interest paid as an expense. (i) Prepare all the relevant journal entries in the separate financial statements of the respective companies.(ii) Prepare all the relevant consolidation journal entries for the preparation of the consolidated financial statements of the Parent.
In the years subsequent to the year of sale of a 90% owned subsidiary who sells equipment to its parent company at a gain, the non-controlling interest in consolidated income is computed by multiplying the non-controlling interest percentage by the subsidiary’s reported income: A. After adding intercompany gain considered realized in that period. B. After adding the intercompany gain on sales C. After deducting the intercompany gain on sales D. After deducting intercompany gain considered realized in that period.
A Parent corporation purchased 25% of the outstanding common shares of Subsidiary Limited for $2,500,000 on January 1, 2020. The following relates to Subsidiary since the acquisition date: Year Net Income Other Comprehensive Income Dividends Paid 2020 $ 51,800 $11,400 $74,000 2021 148,000 29,600 74,000 Required: Assume that Parent is a private company. Even though it has significant influence, it chose to use the cost method to account for its investment. Prepare ALL the journal entries that Parent should make regarding this investment in Year 2020 and Year 2021