Reference no: EM132419015

On January 1, 2018, Smith sold equipment to Martin (a wholly owned subsidiary) for $290,000 in cash. The equipment had originally cost $261,000 but had a book value of only $159,500 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense is computed using the straight-line method.

Smith reported $390,000 in net income in 2018 (not including any investment income) while Martin reported $127,700. Smith attributed any excess acquisition-date fair value to Martin's unpatented technology, which was amortized at a rate of $4,900 per year.

Required:

1. What is consolidated net income for 2018?
2. What is the parent's share of consolidated net income for 2018 if Smith owns only 90 percent of Martin?
3. What is the parent's share of consolidated net income for 2018 if Smith owns only 90 percent of Martin and the equipment transfer was upstream?
4. What is the consolidated net income for 2019 if Smith reports $410,000 (does not include investment income) and Martin $138,600 in income? Assume that Martin is a wholly owned subsidiary and the equipment transfer was downstream.