Reference no: EM133059216
Question - The following information is available concerning transactions between a parent and its wholly-owned subsidiary for the current year.
-The subsidiary purchased land from its parent in a prior year, at a cost of $400,000. The parent had reported the land on its books at $300,000.
-The parent sells merchandise to the subsidiary. The subsidiary's beginning inventory includes intercompany profit of $50,000, and its ending inventory includes intercompany profit of $65,000. Total sales from the parent to the subsidiary were $600,000.
-The parent sold equipment to the subsidiary at the beginning of the current year for $300,000 and reported a gain of $45,000. The equipment has a 5-year life, straight-line.
Required - 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 $100,000 on its own books, and there are no revaluation write-offs for the year.
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