Reference no: EM132606486

Question - Company A sold equipment to Company B (a wholly owned subsidiary) for $350,000 in cash. The equipment had originally cost $315,000 but had a book value of only $192,500 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense is computed using the straight-line method.

Company A reported $450,000 in net income in 2018 (not including any investment income) while Company B reported $147,500. Company A attributed any excess acquisition-date fair value to Company B's un-patented technology, which was amortized at a rate of $5,500 per year.

1. What is consolidated net income for 2018?

2. What is the parent's share of consolidated net income for 2018 if Company A owns only 90 percent of Company B?

3. What is the parent's share of consolidated net income for 2018 if Company A owns only 90 percent of Company B and the equipment transfer was upstream?

4. What is the consolidated net income for 2019 if Company A reports $470,000 (does not include investment income) and Company B $159,000 in income? Assume that Company B is a wholly owned subsidiary and the equipment transfer was downstream.