Advanced Accounting 11th Edition by Paul Fischer,William Tayler, Rita Cheng

Exercise 5

A parent company acquired an 80% interest in a subsidiary on January 1, 2011, at a price high enough to result in goodwill. Included in the assets of the subsidiary are inventory with a book value of $50,000 and a fair value of $55,000 and equipment with a book value of $100,000 and a fair value of $160,000. The equipment has a 5-year remaining life. What impact would the inventory and equipment, acquired in the acquisition, have on consolidated net income in 2011 and 2012?