Preparing a consolidated income statement - with noncontrolling interest, but AAP or intercompany profits A parent company purchased an 70% interest in its subsidiary several years ago with no AAP (i. e., purchased at book value). Each reports the following income statement for the current year, as shown in part b. below.

b. Prepare the consolidated income statement for the current year.

Elimination Entries

Parent Subsidiary Dr. Cr. Consolidated

Income statement:

Sales $6,000,000 $900,000

Cost of goods sold (4,200,000) (540,000)

Gross profit 1,800,000 360,000

Income (loss) from subsidiary 88,2000 0

Operating expenses (1,140,000) (234,000)

Net income $748,200 $126,000

Net income attributable to noncontrolling interests

Net income attributable to parent

Consol. Income    Parent  Subsidiary  Elimination entries    Consolidated

statement                                                 Dr               Cr

Sales                   6000000 900000                                         6900000

COGS                -4200000 -540000                                         -4740000

Gross profit         1800000   360000                                           2160000

Income (loss)       88200         0              88200                              0        

from subsidiary

Operating          -1140000   -234000                                          -1374000

expense

Net income        748200     126000      88200                          786000  

Net income attributable to                       37800                           37800

non-controlling interests*

Net income attributable to Parent                                              748200

Workings:

Net income attributable to non-controlling interests = 126000*30% = 37800

answer; the correct answer is (direct foreign investment);

answer; the above statement/question is ( true);