1 answer

Problem 5-24 (LO 5-7) On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned...

Question:

Problem 5-24 (LO 5-7) On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $210,000 In ca

Problem 5-24 (LO 5-7) On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $210,000 In cash. The equipment had originally cost $189,000 but had a book value of only $115,500 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense is computed using the straight-line method. Ackerman reported $310,000 In net Income in 2018 (not including any Investment Income) while Brannlgan reported $101,300. Ackerman attributed any excess acquisition date fair value to Brannlgan's unpatented technology, which was amortized at a rate of $4,100 per year. a. What is consolidated net Income for 2018? b. What is the parent's share of consolidated net Income for 2018 If Ackerman owns only 90 percent of Brannigan? c. What is the parent's share of consolidated net Income for 2018 If Ackerman owns only 90 percent of Brannigan and the equipment transfer was upstream? d. What is the consolidated net Income for 2019 If Ackerman reports $330,000 (does not include Investment Income) and Brannigan $111,400 In Income? Assume that Brannlgan is a wholly owned subsidiary and the equipment transfer was downstream. % Answer is complete but not entirely correct. Consolidated net income Consolidated net income to parent company Consolidated net income to parent company Consolidated net income Amounts s 331.800 $ 321,880 $ 329,440 $ 451,900

Answers

1 Consolidated net income for 2018
Amount (in $)
Ackerman reported income 310000
Brannigan reported income 101300
Total 411300
Less: Amortization of unpatented technology -4100
Less: Excess depreciation charged on account
of transfer of asset at higher price over
and above the book value
Excess amount = 210000-115500 = 94500 -94500
Add: Excess amount per year of remaining life 18900
(94500 / 5)
Consolidated income = 331600
2 Consolidated net income for 2018 if Ackerman owns only 90% of Brannigan
Amount (in $)
Ackerman reported income 310000
Brannigan reported income (101300 * 90%) 91170
Total 401170
Less: Amortization of unpatented technology (4100 * 90%) -3690
Less: Excess depreciation charged on account
of transfer of asset at higher price over
and above the book value
Excess amount = 210000-115500 = 94500 -94500
Add: Excess amount per year of remaining life 18900
(94500 / 5)
Consolidated income = 321880
3 Consolidated net income for 2018 if Ackerman owns only 90% of Brannigan
and the equipment transfer was upstream
Consolidated income 331600
Less: Net Income attributable to Non controlling interest -2160
10% * (101300-4100-94500-18900)
329440
4 Consolidated net income for 2019
Amount (in $)
Ackerman reported income 330000
Brannigan reported income 111400
Total 441400
Less: Amortization of unpatented technology -4100
Add: Excess amount per year of remaining life 18900
(94500 / 5)
Consolidated income = 456200
.

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