The following items pertain to a parent company and its 60 percent-owned subsi

The following items pertain to a parent company and its 60 percent-owned subsidiary at year end. There are no cross-guarantees of debt between the parent
and subsidiary.

Parent

Subsidiary

Current assets

$ 500000

$1000000

Noncurrent assets(excluding subsidiary investment)

5000000

2000000

Current liabilities

750000

250000

Noncurrent liabilities

2000000

750000

Revenues

1700000

1500000

Expenses

1600000

900000

Dividends

100000

600000

Required:

Explain and illustrate how consolidated reporting using the previous data can be misleading.