Parent Corporation purchased land from S1 Corporation for $220,000 on December 2

Question

Parent Corporation purchased land from S1 Corporation for $220,000 on December 26, 20X8. This purchase followed a series of transactions between P-controlled subsidiaries. On February 15, 20X8, S3 Corporation purchased the land from a nonaffiliate for $160,000. It sold the land to S2 Company for $145,000 on October 19, 20X8, and S2 sold the land to S1 for $197,000 on November 27, 20X8. Parent has control of the following companies: Subsidiary Level of Ownership 2008 Net Income S3 80% $100,000 S2 70% $70,000 S1 90% $95,000 Parent reported income from its separate operations of $200,000 for 20X8. Based on the preceding information, what should be the amount of income assigned to the controlling shareholders in the consolidated income statement for 20X8? A. $369,400 B. $405,000 C. $465,000 D. $60,000

Explanation / Answer

A. $369,400

S1 S2 S3 Bought        1,97,000 Sold        2,20,000 Bought        1,45,000 Sold        1,97,000 Bought        1,60,000 Sold        1,45,000 Profit /(Loss) on sale of land            23,000 Profit /(Loss) on sale of land            52,000 Profit /(Loss) on sale of land          -15,000 Share to Parent Co on Sale of land            20,700 Share to Parent Co on Sale of land              36,400 Share to Parent Co on Sale of land            -12,000 Net profit            95,000 Net profit            70,000 Net profit        1,00,000 Share to Parent Co on total Profits                       1 Share to Parent Co on total Profits                       1 Share to Parent Co on total Profits                       1 % amount to Parent Co on total Profits            85,500 % amount to Parent Co on total Profits            49,000 % amount to Parent Co on total Profits            80,000 Less: eliminate Inter co Share on Sale of land          -20,700 Less: eliminate Inter co Share on Sale of land            -36,400 Less: eliminate Inter co Share on Sale of land              12,000 Final amount to Parent Co            64,800 Final amount to Parent Co            12,600 Final amount to Parent Co            92,000 Total Share from Subsidiaries        1,69,400 Profit to Parent Co on standalone basis        2,00,000 Total Parent Co Profit attributable to controlling share holders        3,69,400

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