70.2K

Verified Solution

Link Copied!

The comparative consolidated income statements of a parent and its 75%-owned subsidiary were prepared incorrectly as at December 31 and are shown in the table given below. The following items were overlooked when the statements were prepared: The Year 5 gain on sale of assets resulted from the subsidiary selling equipment to the parent on September 30. The parent immediately leased the equipment back to the subsidiary at an annual rental of $31,200. This was the only intercompany rent transaction that occurred each year. The equipment had a remaining life of five years on the date of the intercompany sale. The Year 6 gain on sale of assets resulted from the January 1 sale of a building, with a remaining life of seven years, by the subsidiary to the parent. Both gains were taxed at a rate of 40%. Year 6 CONSOLIDATED INCOME STATEMENTS Year 5 Miscellaneous revenues $ 830,000 Gain on sale of assets 20,800 Rental revenue 7,800 858,600 Miscellaneous expenses 412,600 Rental expense 63,900 Depreciation expense Income tax expense 89,000 Non-controlling interest 40,500 697,000 Net income $ 161,600 $ 905,000 53,200 31,200 989, 400 495, 540 69, 100 91,900 102,500 7,080 766, 120 $ 223,280 91,000 Required: Prepare correct consolidated income statements for Years 5 and 6. (Input all values as positive numbers. Leave no cells blank - be certain to enter zero wherever required. Omit $ sign in your response.) Parent Company Corrected Consolidated Income Statements Years 5 and 6 Year 5 Year 6 $ Miscellaneous revenues Miscellaneous expense Rent expense Depreciation expense Income tax expense Consolidated net income Attributable to: Shareholders of Parent $ $ $ NCI $

Answer & Explanation Solved by verified expert

See Answer