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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Consolidated Income Statement

Johnson Inc. is the wholly owned subsidiary of Stuart Corporation. The 2020 income statements for the two corporations are as follows:

Chapter A2, Problem 29E, Consolidated Income Statement Johnson Inc. is the wholly owned subsidiary of Stuart Corporation. The

The acquisition cost of Stuart’s 100% ownership interest in Johnson equaled its book value on Johnson’s records. During 2020. Johnson pays a cash dividend of $25 to Stuart.

Required:

1. Calculate the income from investment in Johnson as reported on Stuart’s income statement.

2. Calculate the 2020 net income reported by the parent company (Stuart) on its income statement.

3. Prepare the 2020 consolidated income statement for Stuart and Johnson.

Describe the three classifications that are possible for investments in debt securities

To determine

(a)

Introduction:

When a company holds 50% or more of the common stock of another company then both the companies are treated as a single entity. In such a case, consolidated statements are prepared.

To calculate:

Income from investment in J Co.

Explanation

INCOME STATEMENT

J Co. ( Pre-acquisition statement)

Particulars $
Sales Revenue 500
(-) Cost of Goods Sold (160)
(-) Depreciation Expense (95)
(-) Other Expenses ...
To determine

(b)

Introduction:

When a company holds 50% or more of the common stock of another company then both the companies are treated as a single entity. In such a case, consolidated statements are prepared.

To calculate:

Net Income of S Co.

To determine

(c)

Introduction:

When a company holds 50% or more of the common stock of another company then both the companies are treated as a single entity. In such a case, consolidated statements are prepared.

To prepare:

Consolidated Income Statement.

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