What is the amount of goodwill to be reported on January 1, 2021 in the consolidated statement of financial position?
A. $300,000 B. $250,000 C. $200,000 D. $150,000
On January 1, 2021, Parent Co. acquired 80% of the ordinary shares of Subsidiary Co. for $1,000,000. At the time of acquisition, Subsidiary's Ordinary shares, share premium, and retained earnings were $100,000, $400,000, and $500,000 respectively. Any excess of cost over the carrying amount was attributable to goodwill.
The following income statement data were prepared by Parent and Subsidiary on December 31, 2022:
Parent Subsidiary
Sales $600,000 $300,000
Other income $40,000 $15,000
Cost of goods sold $320,000 $180,000
Operating expenses $150,000 $32,000
During 2017, no dividends were declared by either company. On January 1, 2017, Parent purchased a machine from Subsidiary for $40,000. The carrying amount of the machine in the books of Subsidiary Co. was $25,000. The total life of the machine was 12 years and the expired life was 7 years with no residual value.
Since the purchase date, Subsidiary Co. bought merchandise from Parent Co. and the selling price of Parent Co. was 125% of cost. Sales during the year 2017 totaled $150,000. The inventory held by Subsidiary Co. was $15,000 on January 1, 2022, and $18,000 on December 31, 2022.
