Reference no: EM132977840
Question - On Jan 1, 2018 the Parent purchases an 80% interest in the Sub for $575,000. On that date the Sub had the following Stockholder's Equity:
Common Stock $100,000
Paid in Capital $100,000
Retained Earnings $225,000
Total $425,000
On this date, all The Sub's Assets and Liabilities Book Value = FMV EXCEPT for Inventory which is under-valued by $15,000 and the Equipment that is under-valued by $40,000 with an 8 year remaining useful life.
Intercompany Transactions:
I. Sub sells INVENTORY to the Parent at a 25% Mark-Up. And During the 2020 Year the Sub sold INVENTORY to the Parent amounting to $224,000. At 12/31/20 the Unsold intercompany inventory was $18,000 and on 1/1/20 the Beginning Intercompany Inventory was $15,000.
II. On 1/1/19 the Parent sold a Building to the Sub. The Equipment had an original COST of $620,000 and Accumulated Depreciation of $200,000. The parent sells the building to the Sub for $600,000 with a 10 year remaining useful life.
III. On 1/1/17 the SUB issued to an INDEPENDENT 3rd party, a $1,000,000 Face Value 10 year 6% Bond Payable at 95% interest paid annually on Dec 31st. On Jan 1, 2020 the Parent PURCHASES the Bond for $1,021,000.
REQUIRED -
I. Prepare the Determination & Distribution of Excess Schedule
II. Prepare the Elimination and Adjusting entries for 12/31/20.
III. What is the Consolidated Net Income?
IV. What is the NCI 12/31/20 Value?
V. What is the 12/31/20 Consolidated Retained Earnings Balance?
Assume the Following:
a. Parent uses the Cost Method and the SUB paid a $35,000 dividend and their ending Retained Earnings Balance is $350,000.
b. Parent's Net Income = $550,000 and the SUB $425,000 PRIOR to the Elimination and Adjusting entries
c. Assume Parent's Retained Earnings balance = ($655,000) and paid a $25,000 Dividend.
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