Problem:
PARENT COMPANY CONCEPT
David Company Book Value
Current Assets: $620,000
Equipment: $260,000
Buildings: $410,000
Liabilities:($390,000)
Revenues: ($900,000)
Expenses: $500,000
Investment income: not given
Mark Company Book Value
Current assets: $300,000
Equipment: $200,000
Buildings: $150,000
Liabilities: ($120,000)
Revenues: ($400,000)
Expenses: $300,000
Mark Company Fair Market Value
Current assets: $320,000
Equipment: $280,000
Buildings: $150,000
Liabilities: ($120,000)
Use the following information for Problems below:
David Company acquired 60 percent of Mark Company for $300,000 when Mark's book value was $400,000. On that date, Mark had equipment (with a 10-year life) that was undervalued in the financial records by $60,000. Also, buildings (with a 20-year life) were undervalued by $40,000. Two years later, the following figures are reported by these two companies (stockholders' equity accounts have been
omitted).
Question 1: What is consolidated net income prior to the reduction for the Noncontrolling interest's share of the subsidiary's income?
a. $455,200
b. $494,000
c. $497,000
d. $495,200
Question 2: What is the Noncontrolling interest's share of the subsidiary's income and what is the ending balance of the Noncontrolling interest in the subsidiary?
a. $42,000 and $252,000
b. $40,000 and $212,000
c. $38,080 and $208,160
d. $35,200 and $207,200
Question 3: What is the consolidated balance of the Equipment account?
a. $488,800
b. $498,400
c. $500,800
d. $508,000