Reference no: EM132837993

The following information is available concerning transactions between a parent and its wholly-owned subsidiary for the current year.

1. The parent sells merchandise to the subsidiary at a markup of 20% on cost. The subsidiary's beginning inventory includes $30,000 purchased from the parent, and its ending inventory includes $42,000 purchased from the parent. Total sales from the parent to the subsidiary were $800,000.
2. The subsidiary sold plant assets to the parent in a prior year, charging the parent $650,000. The plant assets had been reported on the subsidiary's books at a net book value of $350,000. The plant assets had a remaining life of 10 years at the time of the transaction, straight-line, and the transaction occurred 3 years ago.

Required

Problem 1: Compute equity in net income of the subsidiary, reported on the parent's books, for the current year. The parent uses the complete equity method, the subsidiary reports net income of $60,000 on its own books, and revaluation write-offs consist of goodwill impairment of $15,000.