Consolidation: Adjustment to the Income Statement
Presented below are condensed income statements for the MHL Company and its wholly owned subsidiary, PTE Inc., for the year ended December 31, 2000 (dollars in millions). MHL acquired its ownership of PTE in 1989.
|
MHL Company |
PTE Inc. |
|
|
Sales |
$260 |
$180 |
|
Cost of sales |
(110) |
(75) |
|
Other operating expenses |
(145) |
(85) |
|
Net income |
5 |
20 |
Required
Explain how each of the following items would affect your preparation of a consolidated income statement for MHL and PTE:
a. During 2000, PTE made sales to MHL totaling $40 million.
b. At the end of 2000, MHL’s inventory includes $10 million for items purchased from PTE.The cost of these sales incurred by PTE was $4.5 million.
c. At the beginning of 2000, none of MHL’s inventory consisted of goods purchased from PTE.
d. Prepare a consolidated income statement for MHL Company for the year 1998.
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