Question

Martindale Company, a 100% owned subsidiary of Weisman Corporation, sells inventory to Weisman at a 20% profit on selling price. The following data are available pertaining to inter-company purchases by Weisman: Inter-company sales: Unsold at year end (based on selling price): 2020: $18,000 2020: $4,000 2021: $19,400 2021: $6,000 2022: $21,500 2022: $8,000 Martindale's profit numbers were $125,000, $142,000 and $265,000 for 2020, 2021, and 2022, respectively. Weisman received dividends from Martindale of $25,000 for 2020 and 2021, and $30,000 for 2022. Assume Weisman uses the equity method to account for its investment in Martindale. What is the balance in pre-consolidation Income (loss) from subsidiary for 2022

Answer 1

$263,400

Step-by-step explanation:

Calculation to determine the balance in pre-consolidation Income (loss) from subsidiary for 2022

Using this formula

2022 balance in pre-consolidation Income (loss) =2022 Profit -(2022 Selling Price* Selling price profit percentage)

2022 balance in pre-consolidation Income (loss) =$265,000-($8,000*20%)

2022 balance in pre-consolidation Income (loss)=$265,000-$1,600

2022 balance in pre-consolidation Income (loss)= $263,400

Therefore the balance in pre-consolidation Income (loss) from subsidiary for 2022 is $263,400