My feedback from my teacher (For part e, the excess depreciation or ED entry reduces an expense so it has the effect of increasing income. The ED entry also affects part f because the subsidiary's income is being adjusted.)This is what I did:D) EXCESS DEPRECIATION $10,000 PER YEAR DEPRECIATION 01/2020 AFTER SALE $ 12,00060000/5 LESS: DEPRECIATION ON 1/2020 (NOT SOLD) $ (2,000)10000/5 EXCESS DEPRECIATION $ 10,000 E) NET INCOME CONSOLIDATED SUBSIDARY $ 565,000PEARL COMPANY NI 2020 440,000 STAR CORPORATION NI 01/2020 135,000 LESS -INTER COMPANY GAIN ON SALE (10,000) 125,000 CONSOLIDATED NI 565,000 F)NET INCOME OF NCI $ 12,500STAR CORPORATION $ 12,500 125000*.10= Pearl Company acquired90 %of Star Corporation on 1/2018. Fair values of Star's assets and liabilitiesapproximated book values on that date. Pearl uses the initial value methodto account for its investment in Star.On 1/2019, Pearl bought equipment from Star for $60,000 that$ 110,000had originally cost Star $120,000 and hadof Accumulated depreciation at the time. The equipment had a five-yearremaining life and was being depreciated using the straight line method.You are preparing the worksheet for the 2020 fiscal year.d. How much excess depreciation will there be in each of the first five yearsafter the transfer?e. Pearl's 2020 net income, without including any investment income, was$ 440,000 and Star reported net income ofWhat consolidated income will be reported before removing the noncontrolling$ 135,000 in 2020.interest's share of the subsidiary's net income? (This includes the effectof the ED entry.)f. What will the noncontrolling interest's share of the subsidiary's net income be for2020? (Consider whether the equipment sale had been upstream or downstream.)

Intragroup transactions are transactions that occur between entities in the group. They can be…

Answered: Pearl Company acquired 90 % of Star…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 8MC

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My feedback from my teacher (For part e, the excess depreciation or ED entry reduces an expense so it has the effect of increasing income. The ED entry also affects part f because the subsidiary's income is being adjusted.)

This is what I did:

D)	EXCESS DEPRECIATION $10,000 PER YEAR		DEPRECIATION 01/2020 AFTER SALE	$ 12,000	60000/5
			LESS: DEPRECIATION ON 1/2020 (NOT SOLD)	$ (2,000)	10000/5
			EXCESS DEPRECIATION	$ 10,000


E)	NET INCOME CONSOLIDATED SUBSIDARY	$ 565,000	PEARL COMPANY NI 2020		440,000
			STAR CORPORATION NI 01/2020	135,000
			LESS -INTER COMPANY GAIN ON SALE	(10,000)	125,000
			CONSOLIDATED NI		565,000


F)	NET INCOME OF NCI	$ 12,500	STAR CORPORATION	$ 12,500

			125000*.10=

Pearl Company acquired
90 %
of Star Corporation on 1/2018. Fair values of Star's assets and liabilities
approximated book values on that date. Pearl uses the initial value method
to account for its investment in Star.
On 1/2019, Pearl bought equipment from Star for $60,000 that
$ 110,000
had originally cost Star $120,000 and had
of Accumulated depreciation at the time. The equipment had a five-year
remaining life and was being depreciated using the straight line method.
You are preparing the worksheet for the 2020 fiscal year.
d. How much excess depreciation will there be in each of the first five years
after the transfer?
e. Pearl's 2020 net income, without including any investment income, was
$ 440,000 and Star reported net income of
What consolidated income will be reported before removing the noncontrolling
$ 135,000 in 2020.
interest's share of the subsidiary's net income? (This includes the effect
of the ED entry.)
f. What will the noncontrolling interest's share of the subsidiary's net income be for
2020? (Consider whether the equipment sale had been upstream or downstream.)

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