Reference no: EM132574234

Question - Prepare consolidated income statements with and without fair value/book value differentials

Summary income statement information for Woden Corporation and its 70 percent-owned subsidiary, Sit, for the year 2012 is as follows (in thousands):

	Woden	Sit
Sales	$2,000	$800
Income from Sit	98	-
Cost of sales	(1,200)	(400)
Depreciation expense	(100)	(80)
Other expenses	(398)	(180)
Net income	$400	$140

REQUIRED -

1. Assume that Woden acquired its 70 percent interest in Sit at book value on January 1, 2011, when the fair value of Sits' assets and liabilities were equal to recorded book values. There were no intercompany transactions during 2011 and 2012. Prepare a consolidated income statement for Woden Corporation and Subsidiary for 2012.

2. Assume that Woden acquired its 70 percent interest in Sit on January 1, 2011, for $280,000. $60,000 was allocated to a reduction of overvalued equipment with a five-year remaining useful life and the remainder was allocated to goodwill. Sit's book value was $320,000. There were no intercompany transactions during 2011 and 2012. Prepare a consolidated income statement for Woden Corporation and Subsidiary for 2012.