BU487 Lecture Notes - Lecture 15: Historical Cost, Retained Earnings, Financial Statement
Document Summary
Illustration 1: on jan. 1, 2017, the sub sold a machine it bought 5 years ago to the parent for ,000 with an original cost of ,000, 15 year remaining life and an estimated residual value of ,000. The parent agreed upon the estimated useful life and the residual value, and used the machine to generate revenue during the year. Suppose: both firms use straight-line method for amortization, have a tax rate of 40%, and the parent holds 80% ownership of the sub. Required: show the relevant parts of the consolidated financial statements. On dec. 29, 2017, the parent purchased an equipment from an unrelated party for a cost of ,000, and sold it to the sub on dec. 31 of the year for ,000. Sub estimated no residual value and a 10 year life for the equipment. The parent holds 80% ownership of the sub. Required: show the relevant parts of the consolidated financial statements for 2017.
