Subsidiary’s purchase of shares from non-affiliate: some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available. Although the parent may not participate directly when subsidiary purchases treasury stock , the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements. Computation of change in the book value of parent’s equity as a result of repurchase of shares by Q Manufacturing.

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Answer 1

Question

Chapter 9, Problem 9.15E

To determine

Subsidiary’s purchase of shares from non-affiliate:some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Computation of change in the book value of parent’s equity as a result of repurchase of shares by Q Manufacturing.

To determine

Subsidiary’s purchase of shares from non-affiliate: some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

The entry to be recorded by B advertising to recognize the change in book value of the shares held.

To determine

Subsidiary’s purchase of shares from non-affiliate: some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

The preparation of consolidation entries immediately following the purchase of shares by Q.

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Financial Accounting 5.2

Morgan & Co. is currently an all-equity firm with 100,000 shares of stock outstanding at a market price of $30 per share. The company's earnings before interest and taxes are $120,000. Morgan & Co. has decided to add leverage to its financial operations by issuing $750,000 of debt at an 8% interest rate. This $750,000 will be used to repurchase shares of stock. You own 2,500 shares of Morgan & Co. stock. You also loan out funds at an 8% interest rate. How many of your shares of stock in Morgan & Co. must you sell to offset the leverage that the firm is assuming? Assume that you loan out all of the funds you receive from the sale of your stock.

Solve this financial accounting problem

Answer 2

Question

Chapter 9, Problem 9.15E

To determine

Subsidiary’s purchase of shares from non-affiliate:some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Computation of change in the book value of parent’s equity as a result of repurchase of shares by Q Manufacturing.

To determine

Subsidiary’s purchase of shares from non-affiliate: some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

The entry to be recorded by B advertising to recognize the change in book value of the shares held.

To determine

Subsidiary’s purchase of shares from non-affiliate: some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

The preparation of consolidation entries immediately following the purchase of shares by Q.

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Answer 3

Question

Chapter 9, Problem 9.15E

To determine

Subsidiary’s purchase of shares from non-affiliate:some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Computation of change in the book value of parent’s equity as a result of repurchase of shares by Q Manufacturing.

To determine

Subsidiary’s purchase of shares from non-affiliate: some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

The entry to be recorded by B advertising to recognize the change in book value of the shares held.

To determine

Subsidiary’s purchase of shares from non-affiliate: some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

The preparation of consolidation entries immediately following the purchase of shares by Q.

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Answer 4

Question

Chapter 9, Problem 9.15E

To determine

Subsidiary’s purchase of shares from non-affiliate:some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Computation of change in the book value of parent’s equity as a result of repurchase of shares by Q Manufacturing.

To determine

Subsidiary’s purchase of shares from non-affiliate: some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

The entry to be recorded by B advertising to recognize the change in book value of the shares held.

To determine

Subsidiary’s purchase of shares from non-affiliate: some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

The preparation of consolidation entries immediately following the purchase of shares by Q.

Expert Solution & Answer

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See solution

Answer 5

Chapter 9, Problem 9.15E

To determine

Subsidiary’s purchase of shares from non-affiliate:some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Computation of change in the book value of parent’s equity as a result of repurchase of shares by Q Manufacturing.

To determine

Subsidiary’s purchase of shares from non-affiliate: some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

The entry to be recorded by B advertising to recognize the change in book value of the shares held.

To determine

Subsidiary’s purchase of shares from non-affiliate: some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

The preparation of consolidation entries immediately following the purchase of shares by Q.

Answer 6

Chapter 9, Problem 9.15E

To determine

Subsidiary’s purchase of shares from non-affiliate:some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Computation of change in the book value of parent’s equity as a result of repurchase of shares by Q Manufacturing.

Answer 7

Chapter 9, Problem 9.15E

To determine

Subsidiary’s purchase of shares from non-affiliate:some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Computation of change in the book value of parent’s equity as a result of repurchase of shares by Q Manufacturing.

Answer 8

To determine

Subsidiary’s purchase of shares from non-affiliate: some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

The entry to be recorded by B advertising to recognize the change in book value of the shares held.

Answer 9

To determine

Subsidiary’s purchase of shares from non-affiliate: some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

The entry to be recorded by B advertising to recognize the change in book value of the shares held.

Answer 10

To determine

Subsidiary’s purchase of shares from non-affiliate: some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

The preparation of consolidation entries immediately following the purchase of shares by Q.

Answer 11

To determine

Subsidiary’s purchase of shares from non-affiliate: some time subsidiary purchases treasury shares form non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

The preparation of consolidation entries immediately following the purchase of shares by Q.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 9 - Prob. 9.1Q Ch. 9 - Prob. 9.2Q Ch. 9 - Prob. 9.3Q Ch. 9 - Prob. 9.4Q Ch. 9 - Prob. 9.5Q Ch. 9 - Prob. 9.6Q Ch. 9 - Prob. 9.7Q Ch. 9 - Prob. 9.8Q Ch. 9 - Prob. 9.9Q Ch. 9 - Prob. 9.10Q

Solution Summary: The author explains that the parent may not participate directly when subsidiary purchases treasury stock, but their equity may change as a result of the transaction.

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