On January 1, 20X1, Parent Company Purchased 8,000 Shares of the Common

Essay

On January 1, 20X1, Parent Company purchased 8,000 shares of the common stock of Subsidiary Company for $350,000. On this date, Subsidiary had 20,000 shares of $5 par common stock authorized, 10,000 shares issued and outstanding. Other paid-in capital and retained earnings were $150,000 and $200,000 respectively. On January 1, 20X1, any excess of cost over book value is due to a patent, to be amortized over 15 years. Parent Company uses the simple equity method to account for its investment in Sub.
Subsidiary's net income and dividends for two years were:
$\begin{array}{lrr}&20X1&20X2\\\text { Net income } & \$ 50,000 & \$ 90,000 \\\text { Dividends } & 10,000 & 30,000\end{array}$ On January 1, 20X2, Subsidiary Company sold an additional 2,500 shares of common stock to noncontrolling shareholders for $50 per share.
In the last quarter of 20X2, Subsidiary Company sold goods to Parent Company for $40,000. Subsidiary's usual gross profit on intercompany sales is 40%. On December 31, $7,500 of these goods are still in Parent's ending inventory.
Required:
Complete the Figure 8-5 worksheet for consolidated financial statements for 20X2.