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Consolidating firms: What is the consolidated balance of the Equipment account?

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 12 through 14:
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).

12. 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

13. 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

14. What is the consolidated balance of the Equipment account?
a. $488,800
b. $498,400
c. $500,800
d. $508,000

Solution Summary

Guidance on solving these problems is given and computations.

$2.19