Asked by Donna Gentry on May 21, 2024
Verified
On January 1, 2021, Musical Corp. sold equipment to Martin Inc. (a wholly-owned subsidiary) for $168,000 in cash. The equipment originally cost $140,000 but had a book value of only $98,000 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense was calculated using the straight-line method.Musical earned $308,000 in net income in 2021 (not including any investment income) while Martin reported $126,000. Assume there is no amortization related to the original investment.Prepare a schedule of consolidated net income and the share to controlling and noncontrolling interests for 2021, assuming that Musical owned only 90% of Martin and the equipment transfer had been upstream
Consolidated Net Income
The total net income of a parent company and its subsidiaries, after accounting for intercompany transactions and eliminations.
Depreciation Expense
The allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value of the asset over time.
Straight-Line Method
A method of calculating depreciation or amortization by evenly spreading the cost over the useful life of the asset.
- Comprehend and implement the equity method for accounting for investments in common stock.
- Ascertain the net income apportioned to the noncontrolling shareholders in a merged corporation.
- Assess the implications of intra-company equipment transactions on depreciation expenses and the consolidated net income outcome.
Verified Answer
KJ
Learning Objectives
- Comprehend and implement the equity method for accounting for investments in common stock.
- Ascertain the net income apportioned to the noncontrolling shareholders in a merged corporation.
- Assess the implications of intra-company equipment transactions on depreciation expenses and the consolidated net income outcome.