On January 1, 20X8, Parent Company acquired 90% ownership of Subsidiary Corporation, at underlying book value. The fair value of the noncontrolling interest, at the date of acquisition, was equal to 10% of the book value of Subsidiary Corporation. On Mar 17, 20X8, Subsidiary purchased inventory from Parent, for $90,000. Subsidiary sold the entire inventory to an unaffiliated company, for $120,000, on November 21, 20X8. Parent had produced the inventory sold to Subsidiary, for $62,000. The companies had no other transactions during 20X8. Based on the information given, what amount of sales will be reported in the 20X8 consolidated income statement?
Investment in Subsidiary
Investment in subsidiary is accounted for using acquisition method. Comapnies entered into this kind of investment are not allowed to have transaction with each other such s buy and sell.
Answer and Explanation:
the amount of sales to be recorded in the consolidated income statement is $120,000 (B)
Only the sale to outsider or to unaffiliated company will be recorded.
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from Finance 305: Risk ManagementChapter 3 / Lesson 3