Soft Bound Version for Advanced Accounting 13th Edition
13th Edition
ISBN: 9781260110579
Author: Hoyle
Publisher: McGraw Hill Education
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Chapter 7, Problem 19P
a.
To determine
Find the amounts which appear for each line in a consolidated income statement.
b.
To determine
Find the income tax expense which should appear on the consolidated income statement if each company files a separate return.
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Up and its 80 percent–owned subsidiary (Down) reported the following figures for the year ending December 31, 2018. Down paid dividends of $30,000 during this period.
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UP
DOWN
Sales
$(600000)
$(300000)
Cost of goods sold
300000
140000
Operating expenses
174000
60000
Dividend Income
(24000)
-0-
Net income
$(150000)
$(100000)
In 2017, intra-entity gross profits of $30,000 on upstream transfers of $90,000 were deferred into 2018. In 2018, intra-entity gross profits of $40,000 on upstream transfers of $110,000 were deferred into 2019.a. What amounts appear for each line in a consolidated income statement? Explain your computations.b. What income tax expense should appear on the consolidated income statement if each company files a separate return? Assume that the tax rate is 30 percent.
The separate income statements of Coors Company and its 60% owned subsidiary, Vespa Company, for the year ended December 31, 2017, are as follows:                          Coors Company    Vespa CompanySales . . . . . . . . . . . . . . . . . . . . . . . . . . . .$520,000        $370,000Less cost of goods sold. . . . . . . . . . . 350,000          180,000Gross profit . . . . . . . . . . . . . . . . . . . . . .170,000         $190,000Less operating expenses . . . . . . . . . .100,000           90,000Operating income . . . . . . . . . . . . . . . $ 70,000         $100,000Subsidiary (dividend) income . . . . . . 12,600Income before tax . . . . . . . . . . . . . . .. $ 82,600         $100,000Provision for income tax . . . . . . . . . . . 21,756           30,000Net income . . . . . . . . . . . . . . . . . . . . . . $ 60,844         $ 70,000The following additional information is available:a.…
Comparative income statements of Samba Corporation for the calendar years 2017, 2018, and 2019 are as follows (in thousands):Â
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Â
2017
2018
2019
Sales
$14,000
$16,250
$16,850
Cost of Sales
8,100
8,900
9,100
Gross Profit
5,900
7,150
7,750
Operating Expenses
4,700
5,500
6,000
Net Income
1,200
1,650
1,750
ADDITIONAL INFORMATIONÂ
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1. Samba was a 75 percent-owned subsidiary of Pamba Corporation throughout the 2017– 2019 period. Pamba’s separate income (excludes income from Samba) was $6,400,000, $5,600,000, and $7,000,000 in 2017, 2018, and 2019, respectively. Pamba acquired its interest in Samba at its underlying book value, which was equal to fair value on July 1, 2016.Â
2. Pamba sold inventory items to Samba during 2017 at a gross profit to Pamba of $650,000. Half the merchandise remained in Samba’s inventory at December 31, 2017. Total sales by Pamba to Samba in 2017 were $1,600,000. The remaining merchandise was sold by Samba in 2018.Â
3. Pamba’s inventory at December…
Chapter 7 Solutions
Soft Bound Version for Advanced Accounting 13th Edition
Ch. 7 - Prob. 1QCh. 7 - Prob. 2QCh. 7 - Prob. 3QCh. 7 - How does the presence of an indirect ownership...Ch. 7 - Prob. 5QCh. 7 - In accounting for mutual ownerships, what is the...Ch. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - Prob. 10Q
Ch. 7 - Prob. 11QCh. 7 - Jones acquires Wilson, in part because the new...Ch. 7 - Prob. 13QCh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Which of the following is correct for two...Ch. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7PCh. 7 - Prob. 8PCh. 7 - Prob. 9PCh. 7 - Prob. 10PCh. 7 - Prob. 11PCh. 7 - Prob. 12PCh. 7 - Prob. 13PCh. 7 - Prob. 14PCh. 7 - On January 1, 2016, Uncle Company purchased 80...Ch. 7 - Prob. 16PCh. 7 - Prob. 17PCh. 7 - Prob. 18PCh. 7 - Prob. 19PCh. 7 - Clarke has a controlling interest in Rogerss...Ch. 7 - Prob. 21PCh. 7 - Prob. 22PCh. 7 - Prob. 23PCh. 7 - Prob. 24PCh. 7 - Prob. 25PCh. 7 - Prob. 26PCh. 7 - Prob. 27PCh. 7 - Prob. 28PCh. 7 - Prob. 29PCh. 7 - Prob. 1DYSCh. 7 - Prob. 2DYS
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- The following six accounts appear in the 2018 financial statements of Poplar and its 100%-owned subsidiary, Spruce (created in 2011), at the end of 2018.              Poplar                Spruce     Common stock, 12/31/18                     $ 80,000             $ 50,000     Additional paid-in capital, 12/31/18      240,000              160,000     Retained earnings, 12/31/18                            490,000              170,000     Dividends declared, 2018                      120,000                40,000     Equity in net income of Spruce, 2018     50,000     Investment in subsidiary, 12/31/18                 380,000          In addition, Poplar’s Retained Earnings account showed $325,000 on 1/1/18.  Required:  Did Poplar use the cost method or the equity method to record its investment in Spruce? How do you know? Give two reasons.      Provide the following figures: (Show calculations!)  a) Spruce’s retained earnings at 1/1/18:…arrow_forwardComparative income statements of Sub Corporation for the calendar years 2019, 2020, and 2021 are as follows (in thousands):  2019  2020 2021Sales  $22,000  $18,500 $19,250Cost of sales  10,600   9,900 10,100Gross profit  11400  8600  9150Operating expenses 5,700 5,500 6,000Net income  $ 5700 $ 3100  $ 3150ADDITIONAL INFORMATION1. Sub was an 80 percent-owned subsidiary of Pub Corporation throughout the 2019–2021 period. Pub’s separate income (excludes income from Sub) was $7,200,000, $6,600,000, and $7,500,000 in 2019, 2020, and 2021, respectively. Pub acquired its interest in Sub at its underlying book value, which was equal to fair value on July 1, 2017.2. Pub sold inventory items to Sub during 2019 at a gross profit to Pub of $720,000. Half the merchandise remained in Sub’s inventory at December 31, 2019. Total sales by Pub to Sub in 2019 were $1,800,000. The remaining merchandise was sold by Sub in 2020.3. Pub’s inventory at December 31, 2020, included items acquired from Sub on…arrow_forwardComparative income statements of Sub Corporation for the calendar years 2019, 2020, and 2021 are as follows (in thousands):                            2019                                  2020                              2021Sales                                             $22,000                $18,500                      $19,250Cost of sales                  10,600                 9,900                          10,100Gross profit                                    11400                                  8600                           9150Operating expenses             5,700                                 5,500                          6,000Net income                   $ 5700                               $ 3100             $ 3150ADDITIONAL INFORMATION1. Sub was an 80 percent-owned subsidiary of Pub Corporation throughout the 2019–2021 period. Pub’s…arrow_forward
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