Reference no: EM132878333

Question - The comparative consolidated income statements of a parent and its 75%-owned subsidiary were prepared incorrectly as at December 31 and are shown in the table given below. The following items were overlooked when the statements were prepared:

The Year 5 gain on sale of assets resulted from the subsidiary selling equipment to the parent on September 30. The parent immediately leased the equipment back to the subsidiary at an annual rental of $28,800. This was the only intercompany rent transaction that occurred each year. The equipment had a remaining life of five years on the  date of the intercompany sale.

The Year 6 gain on sale of assets resulted from the January 1 sale of a building, with a remaining life of seven years, by the subsidiary to the parent.

Both gains were taxed at a rate of 40%.

CONSOLIDATED INCOME STATEMENTS  Year 5  Year 6 Miscellaneous revenues$820,000 $895,000 Gain on sale of assets 19,200  51,800 Rental revenue 7,200  28,800   846,400  975,600 Miscellaneous expenses 411,000  495,140 Rental expense 62,500  68,500 Depreciation expense 89,000  90,500 Income tax expense 88,000  101,500 Non-controlling interest 39,500  6,840   690,000  762,480 Net income $156,400 $213,120

Required - Prepare correct consolidated income statements for Years 5 and 6. (Input all values as positive numbers. Leave no cells blank - be certain to enter zero wherever required. Omit $ sign in your response.)