Parent Corporation acquired 80 percent of the outstanding voting stock of Sub, Inc., on January 1, 2021, when Sub had a net book value of $500,000. Any excess fair value was assigned to patents and amortized at a rate of $10,000 per year for eight years. 2022 net income and dividends for the parent before consideration of its relationship with Sub (and before adjustments for intra-entity sales) and for the sub are below: Net Income Parent $500,000 Sub $150,000 (Parent NI excludes income from sub) Dividends 60,000 20,000 Inventory balances from the two companies' 12/31/2022 balance sheets were as follows: Account Title Inventory Parent $185,000 Sub $95,000 Intra-Entity Sales: • 2021: Intra-entity sales of $125,000 with an original cost of $47,500 were made. 50% of this inventory was held by the consolidated company as of 12/31/2021. 2022: Intra-entity sales of $100,000 with an original cost of $35,000 were made. 25% of this inventory was held by the consolidated company as of 12/31/2022. Assume that no intra-entity inventory or land sales occurred between Parent and Sub. Instead, on January 1, 2021, Sub sold equipment to Parent for $71,000 cash. The equipment's original cost to Sub was $95,000 and the book value was $65,000 on date of sale. At the time of sale, the equipment had a remaining useful life of five years. i. Entry TA Prepare the worksheet entries for a December 31, 2021, consolidation of these two companies to eliminate the impact of the intra-entity transfer. Account Title Debit Credit ED ii. How much of the gain on sale of equipment has been recognized by the consolidated entity as of 12/31/2022? $ iii. Determine the noncontrolling interest's share of Sub's net income for the year ended 12/31/2021. $

Cornerstones of Financial Accounting
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ChapterA2: Investments
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Parent Corporation acquired 80 percent of the outstanding voting stock of Sub, Inc., on January 1,
2021, when Sub had a net book value of $500,000. Any excess fair value was assigned to patents and
amortized at a rate of $10,000 per year for eight years.
2022 net income and dividends for the parent before consideration of its relationship with Sub (and
before adjustments for intra-entity sales) and for the sub are below:
Net Income
Parent
$500,000
Sub
$150,000
(Parent NI excludes income from sub)
Dividends
60,000
20,000
Inventory balances from the two companies' 12/31/2022 balance sheets were as follows:
Account Title
Inventory
Parent
$185,000
Sub
$95,000
Intra-Entity Sales:
•
2021: Intra-entity sales of $125,000 with an original cost of $47,500 were made. 50% of this
inventory was held by the consolidated company as of 12/31/2021.
2022: Intra-entity sales of $100,000 with an original cost of $35,000 were made. 25% of this
inventory was held by the consolidated company as of 12/31/2022.
Transcribed Image Text:Parent Corporation acquired 80 percent of the outstanding voting stock of Sub, Inc., on January 1, 2021, when Sub had a net book value of $500,000. Any excess fair value was assigned to patents and amortized at a rate of $10,000 per year for eight years. 2022 net income and dividends for the parent before consideration of its relationship with Sub (and before adjustments for intra-entity sales) and for the sub are below: Net Income Parent $500,000 Sub $150,000 (Parent NI excludes income from sub) Dividends 60,000 20,000 Inventory balances from the two companies' 12/31/2022 balance sheets were as follows: Account Title Inventory Parent $185,000 Sub $95,000 Intra-Entity Sales: • 2021: Intra-entity sales of $125,000 with an original cost of $47,500 were made. 50% of this inventory was held by the consolidated company as of 12/31/2021. 2022: Intra-entity sales of $100,000 with an original cost of $35,000 were made. 25% of this inventory was held by the consolidated company as of 12/31/2022.
Assume that no intra-entity inventory or land sales occurred between Parent and Sub. Instead, on
January 1, 2021, Sub sold equipment to Parent for $71,000 cash. The equipment's original cost to
Sub was $95,000 and the book value was $65,000 on date of sale. At the time of sale, the
equipment had a remaining useful life of five years.
i.
Entry
TA
Prepare the worksheet entries for a December 31, 2021, consolidation of these two
companies to eliminate the impact of the intra-entity transfer.
Account Title
Debit
Credit
ED
ii.
How much of the gain on sale of equipment has been recognized by the consolidated entity
as of 12/31/2022?
$
iii. Determine the noncontrolling interest's share of Sub's net income for the year ended
12/31/2021.
$
Transcribed Image Text:Assume that no intra-entity inventory or land sales occurred between Parent and Sub. Instead, on January 1, 2021, Sub sold equipment to Parent for $71,000 cash. The equipment's original cost to Sub was $95,000 and the book value was $65,000 on date of sale. At the time of sale, the equipment had a remaining useful life of five years. i. Entry TA Prepare the worksheet entries for a December 31, 2021, consolidation of these two companies to eliminate the impact of the intra-entity transfer. Account Title Debit Credit ED ii. How much of the gain on sale of equipment has been recognized by the consolidated entity as of 12/31/2022? $ iii. Determine the noncontrolling interest's share of Sub's net income for the year ended 12/31/2021. $
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