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Required: (a) Prepare a correct consolidated income statement. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values.)

Required: (a) Prepare a correct consolidated income statement. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The consolidated income statement of a parent and its 80%-owned subsidiary appears below. It was prepared by an accounting student before reading this chapter. CONSOLIDATED INCOME STATEMENT Sales Rental revenue Interest revenue. Total revenue Cost of goods sold Rent expense Interest expense Administration expenses Income tax expense Non-controlling interest in profit Total costs and expenses Profit $ 500,000 24,000 50,000 $ 574,000 $ 350,000 The following items were overlooked when the statement was prepared: By the parent to the subsidiary By the subsidiary to the parent 24,000 35,000 45,000 42,000 9,000 $ 505,000 $ 69,000 • The opening inventory of the parent contained inventory purchased from the subsidiary with an intercompany profit of $5,000. This inventory was sold by the parent during the current year. . During the year, intercompany sales (at a 40% gross profit rate) were made as follows: $ 100,000 80,000 • At the end of the year, half of the items purchased from the parent remained in the inventory of the subsidiary and none of the inventory purchased from the subsidiary remained in the parent's inventory. • All of the rental revenue and 60% of the interest revenue were intercompany and appeared on the income statement of the parent. • Assume a 40% rate for income tax.
Transcribed Image Text:The consolidated income statement of a parent and its 80%-owned subsidiary appears below. It was prepared by an accounting student before reading this chapter. CONSOLIDATED INCOME STATEMENT Sales Rental revenue Interest revenue. Total revenue Cost of goods sold Rent expense Interest expense Administration expenses Income tax expense Non-controlling interest in profit Total costs and expenses Profit $ 500,000 24,000 50,000 $ 574,000 $ 350,000 The following items were overlooked when the statement was prepared: By the parent to the subsidiary By the subsidiary to the parent 24,000 35,000 45,000 42,000 9,000 $ 505,000 $ 69,000 • The opening inventory of the parent contained inventory purchased from the subsidiary with an intercompany profit of $5,000. This inventory was sold by the parent during the current year. . During the year, intercompany sales (at a 40% gross profit rate) were made as follows: $ 100,000 80,000 • At the end of the year, half of the items purchased from the parent remained in the inventory of the subsidiary and none of the inventory purchased from the subsidiary remained in the parent's inventory. • All of the rental revenue and 60% of the interest revenue were intercompany and appeared on the income statement of the parent. • Assume a 40% rate for income tax.
Required: (a) Prepare a correct consolidated income statement. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values.) Sales Parent Company Consolidated Income Statement for the Current Year Interest revenue Total revenue Cost of goods sold Rent expense Interest expense Administration expenses Income tax expenses Total expenses Attributable to: Shareholders of parent Non-controlling interests $ $ $ 320,000 0 0 320,000 0 45,000 45,000 0
Transcribed Image Text:Required: (a) Prepare a correct consolidated income statement. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values.) Sales Parent Company Consolidated Income Statement for the Current Year Interest revenue Total revenue Cost of goods sold Rent expense Interest expense Administration expenses Income tax expenses Total expenses Attributable to: Shareholders of parent Non-controlling interests $ $ $ 320,000 0 0 320,000 0 45,000 45,000 0
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