Advanced Financial Accounting
11th Edition
ISBN: 9780078025877
Author: Theodore E. Christensen, David M Cottrell, Cassy JH Budd Advanced Financial Accounting
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 9, Problem 9.16E
a. Calculate change in book value of parent equity as a result of repurchase
To determine
Sale of shares subsidiary’s to non-affiliate:when subsidiary sells shares to a party outside the economic entity increases total
The amount assigned to non-controlling interest and controlling interest is also affected by two factors 1. The number of shares sold to non-affiliates and 2. The price at which the shares are sold to non-affiliates.
Requirement 1
Computation of change in the book value of shares held by P as a result of S issuance of additional shares.
b. Journal entry to recognize the change in equity book value
To determine
Sale of shares subsidiary’s to non-affiliate: when subsidiary sells shares to a party outside the economic entity increases total stockholders’ equity of the consolidated entity by the amount received by the subsidiary from sale. Such as sale increases the subsidiary’s total shares outstanding and reduces the percentage ownership held by the parent company.
The amount assigned to non-controlling interest and controlling interest is also affected by two factors 1. The number of shares sold to non-affiliates and 2. The price at which the shares are sold to non-affiliates.
Requirement 2
The entry to be recorded by P advertising to recognize the change in book value of the shares held.
c. Consolidation entries
To determine
Sale of shares subsidiary’s to non-affiliate: when subsidiary sells shares to a party outside the economic entity increases total stockholders’ equity of the consolidated entity by the amount received by the subsidiary from sale. Such as sale increases the subsidiary’s total shares outstanding and reduces the percentage ownership held by the parent company.
The amount assigned to non-controlling interest and controlling interest is also affected by two factors 1. The number of shares sold to non-affiliates and 2. The price at which the shares are sold to non-affiliates.
Requirement 3
The preparation of consolidation entries immediately following the issuance of additional shares
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
unc.4
On January 1, Allen Corporation purchased 30% of the 30,000 outstanding common shares of Towne Corporation at $17 per share as a long-term investment. On the date of purchase, the book value and the fair value of the net assets of Towne Corporation were equal. During the year, Towne Corporation reported net income of $24,000 and declared and paid dividends of $8,000. As of December 31, common shares of Towne Corporation were trading at $20 per share.
Please Indicate the amount of income that would be reported on the income statement and the investment balance on the year-end balance sheet under requirement (a) and requirement (b).
Subject- accounting
On 1 January 20XO Alpha Co purchased 90,000 ordinary $1 shares in Beta Co for $270,000. At that date
Beta Co's retained earnings amounted to $90,000 and the fair values of Beta Co's assets at acquisition
were equal to their book values. Three years later, on 31 December 20X2, the statements of financial
position of the two companies were:
Alpha Co
Beta Co
Sundry net assets
Shares in Beta
230,000
180,000
410,000
260,000
260,000
Share capital
Ordinary shares of $1 each
Retained earnings
200,000
100,000
210,000
410,000
160,000
260,000
The share capital of Beta Co has remained unchanged since 1 January 20X0. The fair value of the non-
controlling interest at acquisition was $42,000.
Required:
a. What amount should appear in the group's consolidated statement of financial position at 31 December
20X2 for goodwill?
b. What amount should appear in the group's consolidated statement of financial position at 31 December
20X2 for non-controlling interest?
c. What amount should appear in the…
Chapter 9 Solutions
Advanced Financial Accounting
Ch. 9 - Prob. 9.1QCh. 9 - Prob. 9.2QCh. 9 - Prob. 9.3QCh. 9 - Prob. 9.4QCh. 9 - Prob. 9.5QCh. 9 - Prob. 9.6QCh. 9 - Prob. 9.7QCh. 9 - Prob. 9.8QCh. 9 - Prob. 9.9QCh. 9 - Prob. 9.10Q
Ch. 9 - Prob. 9.11QCh. 9 - Prob. 9.12QCh. 9 - Prob. 9.13QCh. 9 - Prob. 9.14QCh. 9 - Prob. 9.15QCh. 9 - Prob. 9.16QCh. 9 - Prob. 9.1CCh. 9 - Prob. 9.2CCh. 9 - Prob. 9.3CCh. 9 - Prob. 9.4CCh. 9 - Prob. 9.5CCh. 9 - Multiple-Choice Questions on Preferred Stock...Ch. 9 - Prob. 9.1.3ECh. 9 - Multiple-Choice Questions on Preferred Stock...Ch. 9 - Prob. 9.2.1ECh. 9 - Prob. 9.2.2ECh. 9 - Prob. 9.2.3ECh. 9 - Prob. 9.2.5ECh. 9 - Prob. 9.3ECh. 9 - Prob. 9.4ECh. 9 - Prob. 9.5ECh. 9 - Prob. 9.6ECh. 9 - Prob. 9.7ECh. 9 - Prob. 9.8ECh. 9 - Prob. 9.9ECh. 9 - Prob. 9.10ECh. 9 - Prob. 9.11ECh. 9 - Subsidiary Stock Dividend Lake Company reported...Ch. 9 - Prob. 9.13ECh. 9 - Prob. 9.14ECh. 9 - Prob. 9.15ECh. 9 - Prob. 9.16ECh. 9 - Multiple-Choice Questions on Preferred Stock...Ch. 9 - Prob. 9.17.2PCh. 9 - Multiple-Choice Questions on Preferred Stock...Ch. 9 - Prob. 9.17.4PCh. 9 - Prob. 9.17.5PCh. 9 - Prob. 9.18PCh. 9 - Prob. 9.19PCh. 9 - Prob. 9.20PCh. 9 - Prob. 9.21PCh. 9 - Prob. 9.22PCh. 9 - Prob. 9.23PCh. 9 - Prob. 9.24PCh. 9 - Prob. 9.25PCh. 9 - Prob. 9.26PCh. 9 - Prob. 9.27P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Gant Company purchased 30 percent of the outstanding shares of Temp Company for $76,000 on January 1, 20X6. The following results are reported for Temp Company: Net income Dividends paid Fair value of shares held by Gant: January 1 December 31 a. Carries the investment at fair value. b. Uses the equity method. Required A Required B 20X6 $ 47,000 14,000 Required: Gant Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant's investment in Temp at the end of each year assuming that Gant uses the following options in accounting for its investment in Temp: Complete this question by entering your answers in the tabs below. Income from investment Balance in investment 76,000 95,000 20X6 20X7 $ 42,000 30,000 95,000 92,000 20X7arrow_forwardOn 1 January 20X0 Alpha Co purchased 90,000 ordinary $1 shares in Beta Co for $270,000. At that date Beta Co's retained earnings amounted to $90,000 and the fair values of Beta Co's assets at acquisition were equal to their book values. Three years later, on 31 December 20X2, the statements of financial position of the two companies were: Alpha Co Beta Co $ $ Sundry net assets 230,000 260,000 Shares in Beto 180,000 - Share capital Ordinary shares of $1 each 200,000…arrow_forwardOn 1 January 20X0 Alpha Co purchased 90,000 ordinary $1 shares in Beta Co for $270,000. At that date Beta Co's retained earnings amounted to $90,000 and the fair values of Beta Co's assets at acquisition were equal to their book values. Three years later, on 31 December 20X2, the statements of financial position of the two companies were: Alpha Co Beta Co $ $ Sundry net assets 230,000 260,000 Shares in Beto 180,000 - Share capital Ordinary shares of $1 each 200,000…arrow_forward
- 1. Matray acquired 16,000 ordinary shares of Petros on 1 April 20X9. On 31 December 20X8Petros’s accounts showed a share premium of $4,000 and retained earnings of $15,000. The fairmarket value of non-controlling interest at acquisition was $7,000.Below are the statements of financial position for the two companies as at 31 December 20X9:Matray PetrosNon-current assets:Property, plant and equipment 39,000 33,000Investment in Petros 50,000Current assets 78,000 40,000Total assets 167,000 73,000Equity and liabilitiesEquityOrdinary shares of: $1 each 100,000: 50c each 10,000Share premium 7,000 4,000Retained earnings 40,000 39,000Current liabilities 20,000 20,000Total equity and liabilities 167,000 73,000Required:Prepare the consolidated statement of financial position of Matray as at 31 December 20X9. Assumeprofits have accrued evenly throughout the yeararrow_forwardNorth Ltd acquired $100,000 of shares in South Ltd for trading purposes on 1 January 20X3. Transaction costs of $2,000 were incurred. The fair value of the shares at 31 December 20X3 was $120, 500. Choose the account names and calculate the amount that correctly account for this investment on 31 December 20X3 (amount for the credit entry is not required).arrow_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
- Peace Company issued common shares with a par value of $58,000 and a market value of $165,300 in exchange for 30 percent ownership of Symbol Corporation on January 1, 20X2. Symbol reported the following balances on that date: Assets Cash Accounts Receivable Inventory (FIFO basis) Land Buildings & Equipment Less: Accumulated Depreciation Patent Total Assets Liabilities & Equities Accounts Payable SYMBOL CORPORATION Balance Sheet January 1, 20X2 Bonds Payable Common Stock Additional Paid-In Capital Retained Earnings Total Liabilities & Equities Book Value Fair Value $ 57,000 $ 57,000 97,000 97,000 133,000 163,000 55,000 70,000 505,000 326,000 (245,000) Investment income (loss) Balance in the investment account $ 602,000 $ 22,000 172,000 148,000 12,000 248,000 $ 602,000 32,000 $ 745,000 $ 22,000 172,000 The estimated economic life of the patents held by Symbol is 10 years. The buildings and equipment are expected to last 12 more years on average. Symbol paid dividends of $18,000 during…arrow_forwardAarrow_forwardHarvey Company increased its ownership in Washington Company from 70% to 90% by the purchase of additional shares of the Washington’s outstanding stock from noncontrolling shareholders for a purchase price of $300,000. Immediately prior to the transaction, Harvey’s consolidated balance sheet included a noncontrolling interest balance of $1,000,000.The journal entry by Harvey to record the purchase includes: Select one: A. Cash credit, $333,333 B. APIC credit, $300,000 C. APIC credit, $333,333 D. APIC credit, $33,333arrow_forward
- On January 1, 20X2, Parent Inc. issued 32,000 shares of its P10 par value common stock for all the outstanding shares of Son Company. The fair value of Parent Inc.'s stock is P25 per share. Parent Inc. pays P50,000 in registering the stocks. Given below are the statements of financial position (SFP) of the companies before the acquisition: Parent Inc. Statement of Financial Position January 1, 20X2 Assets Liabilities and Equity P200,000 Accounts Payable 185,000 Bonds Payable 190,000 Common Stock, P10 par value 300,000 Additional Paid-In Capital (APIC) 740,000 Retained Earnings 420,000 Total Liabilities and Equity Cash P210,000 420,000 400,000 500,000 505,000 P2,035,000 Accounts Receivable Inventory Land Building, net of depreciation Equipment, net of depreciation Total Assets P2,035,000 Son Company Statement of Financial Position January 1, 20X2 Book Value Fair Value Accounts Receivable P55,000 130,000 85,000 320,000 140,000 P730,000 P55,000 150,000 130,000 500,000 300,000 P1,135,000…arrow_forwardOn January 1, 20X2, Parent Inc. issued 32,000 shares of its P10 par value common stock for all the outstanding shares of Son Company. The fair value of Parent Inc.'s stock is P25 per share. Parent Inc. pays P50,000 in registering the stocks. Given below are the statements of financial position (SFP) of the companies before the acquisition: Parent Inc. Statement of Financial Position January 1, 20X2 Assets Liabilities and Equity P210,000 420,000 400,000 500,000 505,000 P2,035,000 Cash P200,000 Accounts Payable 185,000 Bonds Payable 190,000 Common Stock, P10 par value 300,000 Additional Paid-In Capital (APIC) 740,000 Retained Earnings 420,000 Total Liabilities and Equity P2,035,000 Accounts Receivable Inventory Land Building, net of depreciation Equipment, net of depreciation Total Assets Son Company Statement of Financial Position January 1, 20X2 Book Value Fair Value P55,000 150,000 130,000 500,000 300,000 P1,135,000 Accounts Receivable Inventory Land P55,000 130,000 85,000 320,000…arrow_forwardOn January 1, 20X5, Peery Company acquired 100 percent of Standard Company's common shares at underlying book value. Peery uses the equity method in accounting for its ownership of Standard. On December 31, 20X5, the trial balances of the two companies are as follows: Item Peery Company Standard Company Debit Credit Debit Credit Current Assets $ 238,000 $ 95,000 Depreciable Assets 300,000 170,000 Investment in Standard Company 100,000 Other Expenses 90,000 70,000 Depreciation Expense 30,000 17,000 Dividends Declared 32,000 10,000 Accumulated Depreciation $ 120,000 $ 85,000 Current Liabilities 50,000 30,000 Long-Term Debt 120,000 50,000 Common Stock 100,000 50,000 Retained Earnings 175,000 35,000 Sales 200,000 112,000 Income from Standard Company 25,000 $ 790,000 $ 790,000 $ 362,000 $ 362,000 Required: Prepare the consolidation entries needed as of December 31, 20X5, to complete a…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education