Asked by Kaiulani Waikiki on Jun 06, 2024
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On January 1, 2021, Musical Corp. sold equipment to Martin Inc. (a wholly-owned subsidiary) for $168,000 in cash. The equipment originally cost $140,000 but had a book value of only $98,000 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense was calculated using the straight-line method.Musical earned $308,000 in net income in 2021 (not including any investment income) while Martin reported $126,000. Assume there is no amortization related to the original investment.What is consolidated net income for 2021?
Consolidated Net Income
The total net income of a parent company and its subsidiaries after eliminating intercompany transactions and minority interests.
Depreciation Expense
The methodical distribution of the expense of a physical asset across its lifespan, representing its depreciation or loss of value due to aging or becoming outdated.
Straight-Line Method
A technique for computing depreciation or amortization by uniformly distributing an asset's cost throughout its expected lifespan.
- Compute the net earnings attributed to the minority interest within a consolidated entity.
- Examine the impact of equipment sales within the same entity on both depreciation and the overall net income after consolidation.
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Learning Objectives
- Compute the net earnings attributed to the minority interest within a consolidated entity.
- Examine the impact of equipment sales within the same entity on both depreciation and the overall net income after consolidation.