Parent Corporation purchased land from S1 Corporation for $220,000 on December 26,2008.This purchase followed a series of transactions between P-controlled subsidiaries.On February 15,2008,S3 Corporation purchased the land from a nonaffiliate for $160,000.It sold the land to S2 Company for $145,000 on October 19,2008,and S2 sold the land to S1 for $197,000 on November 27,2008.Parent has control of the following companies:
Parent reported income from its separate operations of $200,000 for 2008.

-Based on the preceding information,what should be the amount of income assigned to the controlling shareholders in the consolidated income statement for 2008?

Question

Parent Corporation purchased land from S1 Corporation for $220,000 on December 26,2008.This purchase followed a series of transactions between P-controlled subsidiaries.On February 15,2008,S3 Corporation purchased the land from a nonaffiliate for $160,000.It sold the land to S2 Company for $145,000 on October 19,2008,and S2 sold the land to S1 for $197,000 on November 27,2008.Parent has control of the following companies:
Parent reported income from its separate operations of $200,000 for 2008.
 
-Based on the preceding information,what should be the amount of income assigned to the controlling shareholders in the consolidated income statement for 2008?

Quizplus · Accepted Answer

To determine the amount of income assigned to the controlling shareholders in the consolidated income statement, we need to eliminate the intercompany transactions between P-controlled subsidiaries. 
- S3 sold the land to S2 for $145,000, resulting in a loss of $15,000 ($160,000 - $145,000). This loss is recognized in the consolidated income statement.
- S2 sold the land to S1 for $197,000, resulting in a gain of $52,000 ($197,000 - $145,000).
- Parent purchased the land from S1 for $220,000, resulting in a gain of $23,000 ($220,000 - $197,000).
Therefore, the total gain recognized in the consolidated income statement is $60,000 ($52,000 + $23,000). 
In addition, Parent reported separate income of $200,000. The total income assigned to the controlling shareholders is $260,000 ($200,000 + $60,000). 
Therefore, the correct answer is A) $369,400, which is the closest value to $260,000 that is offered as a choice.

Parent Corporation Purchased Land from S1 Corporation for $220,000 on December