a.
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
The balance of investment account to be reported by P company on January 1, 20X5 before sale of shares.
b.
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
The
c.
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
The consolidation entriesto complete consolidation worksheet for 20X5.
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ADVANCED FIN. ACCT. LL W/ACCESS>CUSTOM<
- On January 2, year 1, ABC Company purchased 75% of XYZ's outstanding common stock. On that date, the fair value of the 25% noncontrolling interest was $35,000. During year 1, XYZ had net income of $20,000. Selected balance sheet data at December 31, year 1, is as follows: ABC (Column 1), XYZ (Column 2) During year 1, ABC and XYZ paid cash dividends of $25,000 and $5,000, respectively, to their shareholders. There were no other intercompany transactions. a) In its December 31, year 1 consolidated statement of retained earnings, what amount should ABC report as dividends paid? b) In ABC's December 31, year 1, consolidated balance sheet, what amount should be reported as noncontrolling interest in net assets? c) In its December 31, year 1 consolidated balance sheet, what amount should ABC report as common stock?arrow_forwardOn January 2, year 1, ABC Company purchased 75% of XYZ's outstanding common stock. On that date, the fair value of the 25% noncontrolling interest was $35,000. During year 1, XYZ had net income of $20,000. Selected balance sheet data at December 31, year 1, is as follows: ABC (Column 1), XYZ (Column 2) During year 1, ABC and XYZ paid cash dividends of $25,000 and $5,000, respectively, to their shareholders. There were no other intercompany transactions. In its December 31, year 1 consolidated statement of retained earnings. REQUIRED: 1. In ABC's December 31, year 1, consolidated balance sheet, what amount should be reported as noncontrolling interest in net assets?arrow_forwardGioia Company acquired some of the 65,000 shares of outstanding common stock (no par) of Tristezza Corporation during the current year as a long-term investment. The annual accounting period for both companies ends December 31. The following transactions occurred during the current year: Jan. 10 Purchased 17,875 shares of Tristezza common stock at $11 per share. Dec. 31 a. Received the current year financial statements of Tristezza Corporation that reported net income of $80,000. b. Tristezza Corporation declared a cash dividend of $0.60 per share. c. Tristezza Corporation paid the cash dividend declared in (b). d. Determined the market price of Tristezza stock to be $10 per share. Required: 2. Prepare the journal entries for each of these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)arrow_forward
- Johannes Inc. acquired 80 percent of Corner Brook Ltd. common shares on January 1, Year 4, for $744,000. At that date, the fair value of the non-controlling Interest was $186,000. Corner Brook's balance sheet contained the following amounts at the time of the combination: Cash Accounts Receivable Inventory Construction Work in Progress Other Assets (net) Total Assets 66,000 140,000 40,000 Accounts Payable $ 106,000 Bonds Payable 610,000 950,000 Common Shares ($10 par value) Retained Earnings 400,000 530,000 450,000 $1,646,000 $ 1,646,000 Total Liabilities & Equities During each of the next three years, Corner Brook reported net income of $120,000 and paid dividends of $60,000. On January 1, Year 6, Johannes sold 8,800 of the Corner Brook shares for $260,000 in cash. Johannes used the equity method in accounting for its ownership of Corner Brook. Required: (a) Compute the balance in the Investment account reported by Johannes on January 1, Year 6, before its sale of shares. (Omit $ sign…arrow_forwardLamberson Cookie Corporation purchased 40% of the 325,000 outstanding shares of HC's Fine Foods, Inc. on January 1 of the current year. Lamberson Cookie acquired the shares at a price of $3.90 per share. HC's Fine Foods, Inc. reported net income of $71,000 and declared and paid cash dividends of $25,400 during the current year. At the time of acquisition, the book value of HC's Fine Foods' net assets equaled its market value. Requirement Prepare all journal entries necessary to account for this investment in HC's on Lamberson Cookie's books under the equity method. Prepare all journal entries necessary to account for this investment in HC's on Lamberson Cookie's books under the equity method. (Record debits first, then credits. Exclude explanations from any journal entries.) First, record Lamberson Cookie Corporation's acquisition of a 40% share of HC's Fine Foods, Inc on January 1 of the current year. Account January 1, Current Yeararrow_forwardP Inc. purchased 81% of the voting shares of S Inc for $696,143 cash on January 1, year 2. P recorded Investment in S at cost. The Balance Sheet of P Inc. & S Inc. for year 5 showed the following balances P Inc. S Inc. Investment $696,143 $90,653 What is the amount for Investment on Consolidated Balance Sheet of P Inc. for year5?arrow_forward
- On January 1, Barnyard Corporation acquired common stock of Fresh Hay Corporation. At the time of acquisition, the book value and the fair value of Fresh Hay Corporation's net assets were $1 billion. During the year, Fresh Hay Corporation reported net income of $480 million and declared dividends of $160 million. The fair value of the shares increased by 10 percent during the year. How much income would Barnyard Corporation report for the year related to its investment under the assumption that it:A. Paid $150 million for 15 percent of the common stock and uses the fair value method to account for its investment in Fresh Hay Corporation. (Pay attention to the "fair value method" mention, some who attempted to answer this question got it wrong because they missed that). B. Paid $300 million for 30 percent of the common stock and uses the equity method to account for its investment in Fresh Hay Corporation. Please show all your steps so we can follow what we might be doing wrong.arrow_forwardOn January 1, Barnyard Corporation acquired common stock of Fresh Hay Corporation. At the time of acquisition, the book value and the fair value of Fresh Hay Corporation's net assets were $1 billion. During the year, Fresh Hay Corporation reported net income of $480 million and declared dividends of $160 million. The fair value of the shares increased by 10 percent during the year. How much income would Barnyard Corporation report for the year related to its investment under the assumption that it: A. Paid $150 million for 15 percent of the common stock and uses the fair value method to account for its investment in Fresh Hay Corporation. (Pay attention to the "fair value method" mention, others who attempted to answer this question got it wrong because they missed that). B. Paid $300 million for 30 percent of the common stock and uses the equity method to account for its investment in Fresh Hay Corporation. Please show all your steps so we can follow what…arrow_forwardAs a long-term investment, Fair Company purchased 20% of Midlin Company’s 120,000 shares for $144,000 at the beginning of the reporting year of both companies. During the year, Midlin earned net income of $117,000 and distributed cash dividends of $0.30 per share. At year-end, the fair value of the shares is $150,000. Required: 1. Assume no significant influence was acquired. Record the transactions from the purchase through the end of the year, including any adjustment for the investment’s fair value, if appropriate.arrow_forward
- On January 2, 20Y4, Destiny Company acquired 42% of the outstanding stock of Emerald Company for $350,000. For the year ended December 31, 20Y4 Destiny Company earned income of $200,000 and paid dividends of $25,000. On January 31, 20Y5, Destiny Company sold all of its investment in Emerald Company stock for $400,000. Journalize the entries for Destiny Company for the purchase of the stock, the share of Emerald income, the dividends received from Emerald Company, and the sale of the Emerald Company stock.arrow_forwardOn January 1, 20X7, Phillips Corporation acquired 35 percent of the outstanding shares of Shell Corporation for $100,000 cash. Shell Company reported net income of $175,000 and paid dividends of $25,000 for both 20X7 and 20X8. The fair value of shares held by Phillips was $310,000 and $325,000 on December 31, 20X7 and 20X8 respectively.Based on the preceding information, what amount will be reported by Phillips as its basis in the Shell investment for 20X7, if it used the equity method of accounting? Group of answer choices $122,500 $161,250 $100,000 $152,500arrow_forwardPeanut Company acquired 75 percent of Snoopy Company's stock at underlying book value on January 1, 20X8. At that date, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Snoopy Company. Snoopy Company reported shares outstanding of $350,000 and retained earnings of $100,000. During 20X8, Snoopy Company reported net income of $60,000 and paid dividends of $3,000. In 20X9, Snoopy Company reported net income of $90,000 and paid dividends of $15,000. The following transactions occurred between Peanut Company and Snoopy Company in 20X8 and 20X9:Snoopy Co. sold equipment to Peanut Co. for a $42,000 gain on December 31, 20X8. Snoopy Co. had originally purchased the equipment for $140,000 and it had a carrying value of $28,000 on December 31, 20X8. At the time of the purchase, Peanut Co. estimated that the equipment still had a seven-year remaining useful life.Peanut sold land costing $90,000 to Snoopy Company on June 28, 20X9, for…arrow_forward