Chapter 4, Problem 44P

a.

To determine

Show the journal entry Company B made to record its January 1, 2018, acquisition of an additional 30 percent of Company K shares.

Explanation of Solution

The journal entry Company B made to record its January 1, 2018, acquisition of an additional 30 percent of Company K shares:

Date	Accounts Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	Investment in Company K		$ 301,500
	Cash			$ 300,000
	Additional paid-in Capital from step acquisition			$     1,500
	(to record allocation of additional 30% investment)

Table: (1)

b.

To determine

Prepare a schedule showing how Company B determined the Investment in Company K balance as of December 31, 2018.

Explanation of Solution

The schedule showing how Company B determined Investment in Company K balances as of December 31, 2018:

Particulars	Amount
Investment in Company K on 01/01/17	$           573,000
Equity earnings in 2017 $\left(\$150,000-20,000\right)\times 60\%$	$             78,000
Dividends in 2017 $\left(\$80,000\times 60\%\right)$	$            (48,000)
Additional acquisition of 30%	$           301,500
Equity earnings in 2018 $\left(\$180,000-20,000\right)\times 90\%$	$           144,000
Dividends in 2018 $\left(\$60,000\times 90\%\right)$	$            (54,000)
Investment in Company K on 12/31/18	$           994,500

Table: (2)

c.

To determine

Prepare a consolidated worksheet for Company B, and Company K for December 31, 2018.

Explanation of Solution

The consolidated worksheet for Company B, and Company K for December 31, 2018:

Income statement	Company B	Company K	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	$          (402,000)	$          (300,000)				$         (702,000)
Operating expense	$           200,000	$           120,000	E 20,000			$          340,000
Equity in income of Company K	$          (144,000)		I 144,000			$                      -
Net income	$          (346,000)	$          (180,000)
Consolidated net income						$         (362,000)
Share of non-controlling interest in net income					$      (16,000)	$            16,000
Share of controlling interest in net income						$         (346,000)
Balance Sheet
Current assets	$           224,000	$           190,000				$          414,000
Investment in Company K	$           994,500	$                       -	D 54,000	$        792,000
				$        112,500
				$        144,000
Trademarks	$           106,000	$           600,000				$          706,000
Copyrights	$           210,000	$           300,000	A 100,000	E 20,000		$          590,000
Equipment	$           380,000	$           110,000				$          490,000
Goodwill		$                       -	A 25,000			$            25,000
Total assets	$        1,914,500	$        1,200,000				$       2,225,000
Liabilities	$          (453,000)	$          (200,000)				$         (653,000)
Common stock	$          (400,000)	$          (300,000)	$     300,000			$         (400,000)
Additional paid-in capital	$            (60,000)	$            (80,000)	$       80,000			$           (60,000)
Additional paid-in capital step-acquisition	$              (1,500)					$             (1,500)
Retained earnings	$       (1,000,000)	$          (620,000)				$      (1,000,000)
Non-controlling interest in Company K				S $12,500
				A $88,000	$    (100,500)
					$    (100,500)	$         (100,500)
Total liabilities and equity	$       (1,914,500)	$       (1,200,000)	$  1,223,000	$     1,223,000		$       2,225,000

Table: (3)

Working note:

Statement of retained earnings	Company B	Company K	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	$          (797,000)	$          (500,000)	$     500,000			$         (797,000)
Net Income	$          (346,000)	$          (180,000)				$         (346,000)
Dividends declared	$           143,000	$             60,000		D 54,000	$          6,000	$          143,000
Retained earnings on 31/12	$       (1,000,000)	$          (620,000)				$      (1,000,000)

Table: (4)