Florrick Co. owns 85% of Bishop Inc. The two companies file a consolidated income tax return and Florrick uses theinitial value method to account for the investment. The following information is available from the two companies'financial statements:Separate operating income (excludes equity or dividend income from subsidiary)Net intra-entity gains on assets remaining in the consolidated entity in current year income 60,000(included in separate operating income above)Dividends received from Bishop Inc. (not included in separate operating income above)Dividends paidThe income tax rate was 40%.O $12,280$12,625What was the net income attributable to the noncontrolling interest, assuming that the separate return method wasused to assign the income tax expense?O $10,575FlorrickCo.BishopInc.$500,000 $125,00020,000$31,250O $6,75028,000120,000 50,000-0-

Florrick Co. owns 85% of Bishop Inc. The two companies file a consolidated income tax return and Florrick uses the initial value method to account for the investment. The following information is available from the two companies' financial statements: Separate operating income (excludes equity or dividend income from subsidiary) Net intra-entity gains on assets remaining in the consolidated entity in current year income (included in separate operating income above) Dividends received from Bishop Inc. (not included in separate operating income above) Dividends paid The income tax rate was 40%. O $12,280 O $12,625 What was the net income attributable to the noncontrolling interest, assuming that the separate return method was used to assign the income tax expense? O $10,575 O $31,250 Florrick Co. $500,000 60,000 28,000 120,000 O $6,750 Bishop Inc. $125,000 20,000 -0- 50,000

Florrick Co. owns 85% of Bishop Inc. The two companies file a consolidated income tax return and Florrick uses the initial value method to account for the investment. The following information is available from the two companies' financial statements: Separate operating income (excludes equity or dividend income from subsidiary) Net intra-entity gains on assets remaining in the consolidated entity in current year income (included in separate operating income above) Dividends received from Bishop Inc. (not included in separate operating income above) Dividends paid The income tax rate was 40%. O $12,280 O $12,625 What was the net income attributable to the noncontrolling interest, assuming that the separate return method was used to assign the income tax expense? O $10,575 O $31,250 Florrick Co. $500,000 60,000 28,000 120,000 O $6,750 Bishop Inc. $125,000 20,000 -0- 50,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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i.2
Gardner Corp. owns 80% of the voting common stock of Lockhart Co. Lockhart owns 70% of Canning Co. Gardner and Lockhart both use the initial value method to account for their investments. The following information is available from the financial statements and records of the three companies: Separate company net income before investment income Dividend income from investment in subsidiary Deferral of intra-entity gains Amortization expense related to excess fair value over book value of investment Gardner Lockhart Corp. Co. $900,000 $650,000 $150,000 250,000 120,000 110,000 80,000 What amount should be reported for consolidated net income? 40,000 Canning Co. 20,000 25,000 Separate company net income includes intra-entity gains before the consolidating deferral but does not include dividend income from investment in subsidiary.
Duke Corporation owns a 70 percent equity interest in Salem Company, a subsidiary corporation. During the current year, a portion of this stock is sold to an outside party. Before recording this transaction, Duke adjusts the book value of its investment account. How would the parent record the sales transaction?
Diamond Company owns 80 percent of Emerald and Emerald owns 90 percent of Sapphire, Inc. Separate operating income totals for the current year follow; they contain no investment income. None of these acquisitions required amortization expense. Included in Sapphire’s income is a $50,000 intra-entity gain on transfers to Emerald still in Emerald’s possession.What is Diamond’s accrual-based net income for the year?a. $658,400b. $674,400c. $666,800d. $645,600
A Parent corporation purchased 25% of the outstanding common shares of Subsidiary Limited for $2,500,000 on January 1, 2020. The following relates to Subsidiary since the acquisition date: Year Net Income Other Comprehensive Income Dividends Paid 2020 $ 51,800 $11,400 $74,000 2021 148,000 29,600 74,000 Required: Assume that Parent is a private company. Even though it has significant influence, it chose to use the cost method to account for its investment. Prepare ALL the journal entries that Parent should make regarding this investment in Year 2020 and Year 2021
Pino Corporation owned a 90% interest in a subsidiary, Sino Company, which was accounted for by the equity method, During 2020, Pino share in Sino net income $243,000. Sino declared and paid a $80,000 dividend during Year 2020. There were no differences between the current fair values and carrying amounts of Sino's identifiable net assets on the date of the business combination, and there was no goodwill in the business combination. the consolidated net income of Pino Corporation and Sino for 2020 $ 743,000. Pino income, exclusive of intercompany investment income, for 2020 is: а. $ 743,000. b. $ 500,000. С. $ 533,000. d. $ 560,000.
Washburn Company owns 75 percent of Metcalf Company’s outstanding common stock. During the current year, Metcalf issues additional shares to outside parties at a price more than its per share consolidated value. How does this transaction affect the business combination? How is this impact recorded within the consolidated statements?
Archie Co. has a subsidiary, which is accounted for in its separate financial statements using the cost method. At the end of 2016, the company reports net income of $20,000 in its separate financial statements. Increase in fair value of investment $12,000 Share in net income of subsidiary $4,000 Cash dividends paid by subsidiary and received by the company $3,500 Assuming it has no other subsidiaries and other transactions affecting the net income at a consolidated level, compute the net income of the company at a consolidate level.
Stick Corporation is a wholly owned subsidiary of Point Corporation. Point acquired ownership of Stick on January 1, 20X3, for $28,000 above Stick's reported net assets. At that date, Stick reported common stock outstanding of $60,000 and retained earnings of $90,000. The differential is assigned to equipment with an economic life of seven years at the date of the business combination. Stick reported net income of $30,000 and paid dividends of $12,000 in 20X3. Required: a. Prepare the journal entries recorded by Point Corporation during 20X3 on its books if Point accounts for its investment in Stick using the equity method. b. Prepare the consolidating entries needed at December 31, 20X3, to prepare consolidated financial statements. Complete this question by entering your answers in the tabs below. Required A Required B Prepare the journal entries recorded by Point Corporation during 20X3 on its books if Point accounts for its investment in Stick using the equity method. Note: If no…
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 $30,000. 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 $825,000 5.900,000 Miscellaneous revenues Gain on sale of assets Rental revenue Miscellaneous expenses Rental expense Depreciation expense…
Parent Ltd (Parent) controls a subsidiary Sub Ltd (Sub), in which it owns 70 per cent of the issued capital since 30 June 20X3. The following transactions are relevant for the preparation of the consolidated financial statements for the financial year ending 30 June 20X7. Transaction 1: During the financial year ending 30 June 20X4, Sub sold an item of plant to Parent at a loss. Parent is still using the plant at 30 June 20X7. Transaction 2: Sub paid an interim dividend in August 20X5. Parent is exempt from income tax on dividends received from the subsidiary. Transaction 3: During the financial year ending 30 June 20X7, Parent sold inventory to Sub for a price greater than its cost to Parent. One-third of this inventory is still on hand at 30 June 20X7. Transaction 4: On 1 November 20X6, Parent borrowed $50 000 from Sub at an interest rate of 10 per cent per annum. The interest on the loan is payable every six months starting 1 May 20X7. The loan is still outstanding at 30 June…