On January 1,2008,Parent Company acquired 90 percent ownership of Subsidiary Corporation,at underlying book value.The fair value of the noncontrolling interest at the date of acquisition was equal to 10 percent of the book value of Subsidiary Corporation.On Mar 17,2008,Subsidiary purchased inventory from Parent for $90,000.Subsidiary sold the entire inventory to an unaffiliated company for $120,000 on November 21,2008.Parent had produced the inventory sold to Subsidiary for $62,000.The companies had no other transactions during 2008.
-Based on the information given above,what amount of sales will be reported in the 2008 consolidated income statement?

Question

Quizplus · Accepted Answer

The inventory purchased by Subsidiary from Parent for $90,000 was later sold to an unaffiliated company for $120,000. Therefore, the sales amount that will be reported in the 2008 consolidated income statement is $120,000. Option A ($62,000) is the cost of producing the inventory sold to Subsidiary by Parent, and Option C ($90,000) is the amount that Subsidiary paid to Parent for the inventory. Option D ($58,000) is not relevant to this question.

On January 1,2008,Parent Company Acquired 90 Percent Ownership of Subsidiary