On january 1 20x9 dills company sold a new machine to

Reference no: EM13570092

Dills Company purchased an 80% interest in the common stock of Sarada Company for $140,000 on January 1, 20X7. On this date the book value of Sarada's net identifiable assets totaled $100,000. Any excess was attributed to a patent with a 10-year life.

During 20X9, Dills Company and Sarada Company reported the following internally generated income before taxes:

	Dills Co.	Sarada Co.
Sales	$300,000	$120,000
Cost of goods sold	(200,000)	(90,000)
Gain on machine	10,000	--
Expenses	(40,000)	(20,000)
Income before taxes	$ 70,000	$ 10,000

Sarada Company routinely sells goods to Dills Company. This year those sales amounted to $60,000. Dills Company inventories included intercompany goods of $30,000 at the beginning of the year and $12,000 at the end of the year. Sarada Company sells goods to Dills Company at a gross profit of 16.67%.

On January 1, 20X9 Dills Company sold a new machine to Sarada Company, for $40,000. The cost of the machine was $30,000. It has a 5-year life.

The firms file separate tax returns. Both are subject to a 30% tax rate. Dills Company receives an 80% dividend deduction.

Required:

Prepare a consolidated income statement for 20X9. Include income distribution for both firms.

Reference no: EM13570092

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