LargeCo files on a consolidated basis with LittleCo. The subsidiary was acquired for $400,000 on January 1, year 1, and it paid a $75,000 dividend to LargeCo at the end of both year 2 and year 3.
a. Given the following information about the subsidiary's operating results, derive the requested amounts as of
December 31 of each year. The group files using a calendar year.

b. LargeCo sold LittleCo to an unrelated competitor for $600,000 on December 31, year 3. How will LargeCo account for this sale?

Question

LargeCo files on a consolidated basis with LittleCo. The subsidiary was acquired for $400,000 on January 1, year 1, and it paid a $75,000 dividend to LargeCo at the end of both year 2 and year 3.
a. Given the following information about the subsidiary's operating results, derive the requested amounts as of
December 31 of each year. The group files using a calendar year.
  
b. LargeCo sold LittleCo to an unrelated competitor for $600,000 on December 31, year 3. How will LargeCo account for this sale?

Quizplus · Accepted Answer

The Answer of LargeCo files on a consolidated basis with LittleCo. The subsidiary was acquired for $400,000 on January 1, year 1, and it paid a $75,000 dividend to LargeCo at the end of both year 2 and year 3.
a. Given the following information about the subsidiary's operating results, derive the requested amounts as of
December 31 of each year. The group files using a calendar year.
  
b. LargeCo sold LittleCo to an unrelated competitor for $600,000 on December 31, year 3. How will LargeCo account for this sale?

LargeCo Files on a Consolidated Basis with LittleCo