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Category > Accounting Posted 25 Sep 2017 My Price 9.00

Sad Corporation

Consolidated income statement (constructive gain on purchase of parent’s bonds)

Comparative income statements for Pim Corporation and its 100 percent-owned subsidiary, Sad Corporation, for the year ended December 31, 2019, are summarized as follows:

 

Pim

Sad

Sales

$1,000,000

$500,000

Income from Sad

226,000

—

Bond interest income (includes

—

22,000

discount amortization)

    

Cost of sales

(670,000)

(200,000)

Operating expenses

(150,000)

(100,000)

Bond interest expense

(50,000 )

—

Net income

$ 356,000

$222,000

Pim purchased its interest in Sad at fair value equal to book value on January 1, 2011. On January 1, 2012, Pim sold $500,000 par of 10 percent, 10-year bonds to the public at par, and on January 2, 2019, Sad purchased $200,000 par of the bonds at 97. The companies use straight-line amortization. There are no other intercompany transactions between the affiliates.

Required: Prepare a consolidated income statement for Pim Corporation and Subsidiary for the year ended December 31, 2019.

Answers

Maurice Tutor
(5)
Status NEW Posted 25 Sep 2017 02:09 PM My Price 9.00

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