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

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    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

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    Solution Summary

    Guidance on solving these problems is given and computations.

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