On January 1, 20X1, Parent Company Purchased 8,000 Shares of the Common

question 37

Essay

On January 1, 20X1, Parent Company purchased 8,000 shares of the common stock of Subsidiary Company for $350,000. On this date, Subsidiary had 20,000 shares of $5 par common stock authorized, 10,000 shares issued and outstanding. Other paid-in capital and retained earnings were $150,000 and $200,000 respectively. On January 1, 20X1, any excess of cost over book value is due to a patent, to be amortized over 15 years. Parent Company uses the simple equity method to account for its investment in Sub.
Subsidiary's net income and dividends for two years were:
On January 1, 20X2, Subsidiary Company sold an additional 2,500 shares of common stock to noncontrolling shareholders for $50 per share.
In the last quarter of 20X2, Subsidiary Company sold goods to Parent Company for $40,000. Subsidiary's usual gross profit on intercompany sales is 40%. On December 31, $7,500 of these goods are still in Parent's ending inventory.
Required:
Complete the Figure 8-6 worksheet for consolidated financial statements for 20X2.

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Definitions:

Bully

A person who intimidates or harasses others, typically using strength or influence, to exert control or to demean.

Dyadic Process

A dynamic interaction between two entities or individuals, emphasizing the mutual influence and exchange.

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A persuasion technique where a small initial request is made to increase the likelihood of compliance with a larger request later.

Lowballing

A sales technique in which a customer is initially offered a lower price than the actual price intended to be charged, after they have agreed to purchase.