Parent

Subsidiary

Dr.

Cr.

Sales
- Subsidiary
- 3rd party
Cost of Sales
- Subsidiary
- 3rd party

Inventory, beg
Purchases
Available for sale
Inventory, end
Cost of Sales

86,400
57,500
143,900

86,400
84,240
84,240

72,000
46,000
118,000

54,000
64,800
64,800

120,000
120,000
2,000
118,000

86,400
86,400
21,600
64,800

72,000
64,800

3,600

NCI

Conso
141,740
141,740
Recorded
72,000
64,800
136,800

54,000
46,000
100,000

Subsidiary

21,600

Correct
54,000
54,000

25% MU
3,600 =

20,000
Parent

????

Adjustment

82,800

18,000
2,000
20,000

Parent
75,000

Cost

Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Book Value

for
for
for
for
for
for
for
for

2012
2013
2014
2015
2016
2017
2018
2019

(over) under
depreciation
9,375
625
9,375
625
9,375
625
9,375
625
9,375
625
9,375
625
9,375
625
9,375
625
75,000
(5,000)

Parent

Depreciation for 2012

Depreciation for 2013
Depreciation for 2014
Depreciation for 2015
Depreciation for 2016
Depreciation for 2017
Accumulated Depn

Cost

Depreciation for 2012

Depreciation for 2013
Depreciation for 2014
Accumulated Depn
Book Value

9,375
9,375
9,375
9,375
9,375
9,375
56,250

(over) under
depreciation

23,750

Parent
75,000

9,375
9,375
9,375
28,125
46,875

(3,125)

Cost

Depreciation for 2012

Depreciation for 2013
Depreciation for 2014
Depreciation for 2015
Accumulated Depn
Book Value

Parent
75,000

9,375
9,375
9,375
4,688
32,813
42,188

piecemeal
(over) under
depreciation

(5,000)
625
625
625
313
(2,813)

Subsidiary
100,000
20,000
80,000
75,000
(5,000)

Cost
Accumulated Depreciation
Book Value
Selling Price
Loss On Sale

10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
80,000

Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Book Value

for
for
for
for
for
for
for
for

2012
2013
2014
2015
2016
2017
2018
2019

Subsidiary
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
80,000

Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Accumulated Depn

for
for
for
for
for
for
for
for

2010
2011
2012
2013
2014
2015
2016
2017

Subsidiary
100,000
10,000
10,000
10,000
10,000
10,000
50,000
50,000

Cost
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Accumulated Depn
Book Value

for
for
for
for
for

2010
2011
2012
2013
2014

30,000

Net Income (unadjusted)

Compute first for the useful life

20,000 Accum Depn for 2 years means 10,000
which means the equipment has 10 years use
remaining useful life is 8 years (10 years - 2 y

(3,125)
26,875
21500

Loss on sale
Net Income (adjusted)
Share of Parent in Subsidiary income (80%)

Subsidiary
100,000
10,000
10,000

Cost
Annual Depreciation for 2010
Annual Depreciation for 2011

10,000
10,000
10,000
5,000
55,000
45,000

Annual Depreciation for 2012

Annual Depreciation for 2013
Annual Depreciation for 2014
Depreciation for 2015
Accumulated Depn
Book Value

30,000
(313)
(2,813)
26,875

Net Income (unadjusted)

under depreciation for 2015 not yet adjusted as of year end
Loss on Sale
Net Income (adjusted)

21500

Share of Parent in Subsidiary income (80%)

r 2 years means 10,000 Annual Depreciation

ment has 10 years useful life (10,000/100,000)
8 years (10 years - 2 years)

Compute first for annual depreciation

150,000 Accum Depn for 4 years means 37,500 Annual Depreciation
next compute for depreciable amount 37,500 x 20 years = 750,000
next compute for residual value = 800,000 - 750,000 = 50,000

Cost
Accumulated Depreciation
Book Value
Selling Price
Gain on Sale

Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual

Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation

for
for
for
for
for
for
for
for
for
for
for
for
for
for
for
for

2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028

Parent
800,000
150,000
650,000
700,000
50,000

Subsidiary
700,000

(over) under
depreciation
37,500
(3,125)
37,500
(3,125)
37,500
(3,125)
37,500
(3,125)
37,500
(3,125)
37,500
(3,125)
37,500
(3,125)
37,500
(3,125)
37,500
(3,125)
37,500
(3,125)
37,500
(3,125)
37,500
(3,125)
37,500
(3,125)
37,500
(3,125)
37,500
(3,125)
37,500
(3,125)

Depreciable amount
Residual Value
Book Value

600,000
50,000
650,000

Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual

(over) under
Parent depreciation
37,500
37,500
37,500
37,500
37,500
37,500
37,500
37,500
37,500

Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation

for
for
for
for
for
for
for
for
for

2009
2010
2011
2012
2013
2014
2015
2016
2017

50,000

40,625
40,625
40,625
40,625
40,625
40,625
40,625
40,625
40,625
40,625
40,625
40,625
40,625
40,625
40,625
40,625
650,000
50,000
700,000

Subsidiary

40,625
40,625
40,625
40,625
40,625

Accumulated Depn

Cost
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Accumulated Depn
Book Value

337,500

for
for
for
for
for
for
for
for
for
for
for

2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Parent
800,000
37,500
37,500
37,500
37,500
37,500
37,500
37,500
37,500
37,500
37,500
375,000
425,000

134,375

over (under)
depreciation

203,125

Subsidiary
700,000

40,625
40,625
40,625
40,625
40,625
40,625

31,250

243,750
456,250

300,000
adjustment to income from subsidiary
share of parent in subsidiary NI
total income from subsidiary

31,250
255,000
286,250

255,000

Cost

compute for annual depreciation for subsidiary

700,000 - 50,000 = 650,000 / 16 years remaining = 40,625 annual depn
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual

Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation

for
for
for
for
for
for
for
for
for
for
for
for
for
for
for
for

2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028

for
for
for
for
for

2013
2014
2015
2016
2017

Depreciable amount
Residual Value

Annual
Annual
Annual
Annual
Annual

Depreciation
Depreciation
Depreciation
Depreciation
Depreciation

Accumulated Depn

Cost

Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Annual Depreciation
Accumulated Depn
Book Value

for
for
for
for
for
for
for

2013
2014
2015
2016
2017
2018
2019

Subsidiary net income

share of parent in subsidiary net income (85%)

Cash
Accounts Receivable
Inventory
Land
Building and Equipment
Less: Accumulated Depreciation
Investment in Subsidiary Corporation
Goodwill
Total Assets
Accounts Payable
Bonds Payable
Ordinary Shares
Retained Earnings
Share of NCI in GW and revaluation
NCI
Total Liabilities and SHE

Parent
Corporation
60,000
80,000
90,000
100,000
200,000
(80,000)
160,000

Subsidiary
Corporation
20,000
30,000
40,000
40,000
150,000
(50,000)

610,000

230,000

100,000
95,000
200,000
215,000

30,000
40,000
40,000
120,000

610,000

230,000

Dr.

Cr.

NCI

5,000
20,000

160,000
15,000

32,000
96,000
8,000

8,000
24,000
8,000
40,000

Conso
80,000
110,000
135,000
160,000
350,000
(130,000)
0
15,000
720,000
130,000
135,000
200,000
215,000
40,000
720,000

P 300,000

PARENT APPROACH AND PROPRIETARY THEORY APPROACH ARE THE SAME

Consideration
Subsidiary Interest
Excess
Revaluation
Land
Equipment
Patent

TOTAL
200,000
160,000
40,000

CI
180,000
144,000
36,000

NCI
20,000
16,000
4,000

5,000
10,000
25,000

4,500
9,000
22,500

500
1,000
2,500

Equipment

10,000 / 5 years = 2,000 additional depreciation every ye

Patent

25,000 / 5 years = 5,000 additional amortization every ye

Parent
Unadjusted NI

Adjustend NI
Share of Parent

20,700

Subsidiary
30,000
(2,000)
(5,000)
23,000

epreciation every year

mortization every year

Jan 1 2013
income fr sub
Jan 1 2014
income fr sub
Jan 1 2015
income fr sub
Jan 1 2016

Investment in Subsidiary
180,000
20,700
9,000 share in sub dividend
191,700
20,700
9,000 share in sub dividend
203,400
20,700
9,000 share in sub dividend
215,100

Amortization of Intangible Asset

50,000 / 8 years = 6,250

2013
Unadjusted Net Income

income fr subsidiary

Unadjusted Net Income

income fr subsidiary

Parent
100,000

Subsidiary
30,000
(6,250)
100,000 +
23,750 =
19,000
119,000

2014
Parent
Subsidiary
100,000
45,000
(6,250)
100,000 +
38,750 =
31,000
131,000

Amortization of Intangible
123,750

Parent's Retained Earnings

total net income for 2013
dividend declared for 2013
total net income for 2014
dividend declared for 2014

Amortization of Intangible
138,750

119,000
(30,000)
131,000
(30,000)
190,000