29 Jun Question 14. On January 1, 20X1, Par
Question
14. On January 1, 20X1, Parent Company purchased 90% of the common stock of Subsidiary Company for $562,000. On this date Subsidiary had total owner’s equity of $550,000, including retained earning of $250,000.
On January 1, 20X1, the only tangible asset of Subsidiary that was undervalued was building, which was worth $30,00 more than book value. The building has a remaining life of 9 years and is depreciated using the straight-line method. Any excess from the purchase is attributed to goodwill.
During 20X1 and 20X2, Parent has appropriately accounted for its investment in Subsidiary using the simple equity method.
On January 1, 20X2, Parent held merchandise acquired from Subsidiary for $15,000. During 20X2, Subsidiary sold merchandise to Parent for $80,000, of which $20,000 is held by Parent on December 31, 20X2. Subsidiary’s usual gross profit on affiliated sales is 40%.
On December 31, 20X1, Parent sold some equipment to Subsidiary with a cost of $50,000, and a book value of $25,000. The sales price was $40,000. Subsidiary is depreciating the equipment over 3-year life, assuming no salvage value and using the straight-line method.
Parent and Subsidiary qualify as an affiliated group for tax purposes and thus will file a consolidated tax return. Assume a 30% corporate income tax rate.
Required:
Complete the Figure 6-9 vertical worksheet for consolidated financial statements for the year ended December 31, 20X2.
6-37
Chapter 6
6-38
Chapter 6
15. On January 1, 20X1, Parent Company acquired 70% of the common stock of Subsidiary Company for $340,400, in a taxable combination. On this date, Subsidiary had total owners’ equity of $422,000, including retained earnings of $222,000. Any excess of cost over book value is attributable to a patent, which is to be amortized over 15 years.
During 20X1 and 20X2, Subsidiary Company reported the following information:
………………..
Net income before taxes
20X1
20X2
$40,000
$80,000
Dividends…………………………….
0
30,000
During 20X1 and 20X2, Parent has appropriately accounted for its investment in Subsidiary using the simple equity method, including income tax effects.
On January 1, 20X2, Parent held merchandise acquired from Subsidiary for $10,000. During 20X2, Subsidiary sold merchandise to Parent for $60,000, of which $20,000 is held by Parent on December 31, 20X2. Subsidiary’s usual gross profit on affiliated sales is 40%.
Parent and Subsidiary do not qualify as an affiliated group for tax purposes and thus will file separate tax returns. Assume a 30% corporate tax rate and an 80% dividends-received deduction.
Required:
Complete Figure 6-10 the worksheet for consolidated financial statements for the year ended December 31, 20X2. Round all computations to the nearest dollar.
6-39
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.