ADVANCED FINANCIAL ACCOUNTING IA
12th Edition
ISBN: 9781260545081
Author: Christensen
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 9, Problem 9.22P
To determine
Subsidiary
During the preparation of consolidated financial statements, the amount of subsidiary shareholders’ equity accruing to preferred shareholders must be determined before dealing with elimination of the intercompany common stock ownership. If the parent holds some of the subsidiary preferred stock, its portion of stock interest is eliminated. Any portion of subsidiary preferred stock interest not held by parent is assigned to non-controlling interest.
The preparation of consolidation entries needed to complete worksheet for 20X6.
Expert Solution
Answer to Problem 9.22P
| Debit | Credit | |
| 1. Eliminate income from subsidiary | ||
| Income from subsidiary | 58,700 | |
| Dividends declared | 9,000 | |
| Investment in W common stock | 49,500 | |
| 2. Elimination of dividends | ||
| Dividends income | 9,000 | |
| Dividends declared preferred stock | 9,000 | |
| 3. Eliminate income to Non-controlling interest | ||
| Income to Non-controlling interest | 12,500 | |
| Dividends declared − preferred stock | 6,000 | |
| Dividends declared- common stock | 1,000 | |
| Non-controlling interest | 5,500 | |
| 4. Eliminate opening balance if investment | ||
| Common stock − S corporation | 100,000 | |
| 250,000 | ||
| Investment in S common stock | 315,000 | |
| Non-controlling interest | 35,000 | |
| 5. Eliminate preferred stock | ||
| Preferred stock − S corporation | 200,000 | |
| Investment in W preferred stock | 120,000 | |
| Non-controlling interest | 80,000 | |
| Dividends payable and receivable elimination | ||
| Dividends payable | 9,000 | |
| Dividends receivable | 9,000 |
Explanation of Solution
- Income from subsidiary is eliminated by debit income for subsidiary and credit investment in S and dividends are declared.
- Dividends income from preferred stock is eliminated by debit entry in dividend income and credit dividends are declared.
- Eliminate income from non-controlling interest by reverse entry of debit income from non-controlling interest and credit Dividends declared accounts and non-controlling interest.
- Eliminate opening balance in common stock by debit S’s common stock and credit investment and non-controlling interest account.
- Preferred stock is eliminated by debiting it and credit of investment and non-controlling interest.
- Dividends receivable and payable is eliminated by setoff entry and reversal.
To determine
Subsidiary preferred stock outstanding: many companies have more than one type of outstanding stock and each type of security serves a particular purpose. Subsidiary preferred shareholders have claim on the net assets of the subsidiary, and special attention must be given to that claim in the preparation of consolidated financial statements.
During the preparation of consolidated financial statements, the amount of subsidiary shareholders’ equity accruing to preferred shareholders must be determined before dealing with elimination of the intercompany common stock ownership. If the parent holds some of the subsidiary preferred stock, its portion of stock interest is eliminated. Any portion of subsidiary preferred stock interest not held by parent is assigned to non-controlling interest.
The preparation of consolidation worksheet as of December 31 20X6.
Expert Solution
Answer to Problem 9.22P
Explanation of Solution
P and S companies
Consolidation worksheet
December 31, 20X6
| Eliminations | |||||
| P | S | Debit | Credit | Consolidation | |
| Sales | 500,000 | 300,000 | 800,000 | ||
| Dividend income | 9,000 | 9,000 | |||
| Income from subsidiary | 58,500 | 58,500 | |||
| Total sales | 567,500 | 300,00 | 800,000 | ||
| Less COGS | (280,000) | (170,000) | (450,000) | ||
| Less | (40,000) | (30,000) | (70,000) | ||
| Other expenses | (131,000) | (20,000) | (151,000) | ||
| Consolidated net income | 116,500 | 80,000 | 67,500 | 129,000 | |
| Income to NCI | 12,500 | (12,500) | |||
| Controlling interest | 116,500 | 80,000 | 80,000 | 116,500 | |
| Retained earnings: | |||||
| Balance | 435,000 | 250,000 | 250,000 | 435,000 | |
| Net income | 116,500 | 80,000 | 80,000 | 116,500 | |
| Less dividends | |||||
| Preferred | (15,000) | 9,000 | |||
| 6,000 | |||||
| Common stock | (60,000) | (10,000) | 9,000 | ||
| 1,000 | (60,000) | ||||
| Ending balance | 491,500 | 305,000 | 330,000 | 25,000 | 491,500 |
| Cash | 58,000 | 100,000 | 158,000 | ||
| 80,000 | 120,000 | 200,000 | |||
| Dividends receivable | 9,000 | 9,000 | |||
| Inventory | 100,000 | 200,000 | 300,000 | ||
| Buildings and equipment | 360,000 | 270,000 | 630,000 | ||
| Investment in S | |||||
| Preferred stock | 120,000 | 120,000 | |||
| Common stock | 364,500 | 49,500 | |||
| 315,000 | |||||
| Total Assets | 1,091,500 | 690,000 | 1,288,000 | ||
| Accounts payable | 100,000 | 700,000 | 170,000 | ||
| Dividends payable | 15,000 | 9,000 | 6,000 | ||
| Bonds payable | 300,000 | 300,000 | |||
| Preferred stock | 200,000 | 200,000 | |||
| Common stock | 200,000 | 100,000 | 100,000 | 200,000 | |
| Retained earnings | 491,500 | 305,000 | 330,000 | 25,000 | 491,500 |
| 5,500 | |||||
| 35,000 | |||||
| 80,000 | 120,500 | ||||
| Total liability and equity | 1,091,500 | 690,000 | 639,000 | 639,000 | 1,288,000 |
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
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…
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
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…
Subject- accounting
Chapter 9 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
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 - Prob. 9.1.1ECh. 9 - Prob. 9.1.2ECh. 9 - Prob. 9.1.3ECh. 9 - Prob. 9.1.4ECh. 9 - Prob. 9.2.1ECh. 9 - Prob. 9.2.2ECh. 9 - Prob. 9.2.3ECh. 9 - Prob. 9.2.4ECh. 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 Stake Company reported...Ch. 9 - Prob. 9.13ECh. 9 - Prob. 9.14ECh. 9 - Prob. 9.15ECh. 9 - Prob. 9.16ECh. 9 - Prob. 9.17.1PCh. 9 - Prob. 9.17.2PCh. 9 - Prob. 9.17.3PCh. 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
Similar questions
- In its December 31, year 1 consolidated balance sheet, what amount should ABC report as common stock?arrow_forwardRequired information On January 1, 20X2, Power Company acquired 80 percent of Strong Company's outstanding stock for cash. The fair value of the noncontrolling interest was equal to a proportionate share of the book value of Strong Company's net assets at the date of acquisition. Selected balance sheet data at December 31, 20X2 are as follows: Total Assets Liabilities Common Stock Retained Earnings Total Liabilities & Stockholders' Equity Multiple Choice O $35,200 Based on the preceding information, what amount should be reported as noncontrolling interest in net assets in Power Company's December 31, 20X2, consolidated balance sheet? $48,200 $76,800 Power $ 564,000 O $112,800 180,000 150,000 234,000 $ 564,000 Strong $ 216,000 65,000 80,000 96,000 $ 241,000arrow_forwardputt corporation acquired 70 percent of slice company's voting commonarrow_forward
- 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 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_forwardOn January 1, Parent Company acquired 90% of Subsidiary Company in exchange for 5,400 shares of P10 par common stock having a market value of P120,600. Parent and Subsidiary condensed balance sheet on January 1, were as follows: REQUIREMENTS: USING THE ADDITIONAL INFORMATION WHAT IS THE AMOUNT OF THE: a. The investment balance on December 31 b. Dividend Income for the year c. Non-controlling interest in net income on December 31arrow_forward
- Photo from XYZarrow_forwardProblems 15 through 18 are based on the following information:On July 1, TruData Company issues 10,000 shares of its common stock with a $5 par value and a $40 fair value in exchange for all of Webstat Company’s outstanding voting shares. Webstat’s precombination book and fair values are shown below along with book values for TruData’s accounts.On its acquisition-date consolidated balance sheet, what amount should TruData report as retained earnings as of July 1?a. $130,000b. $210,000c. $260,000d. $510,000arrow_forwardProblems 15 through 18 are based on the following information:On July 1, TruData Company issues 10,000 shares of its common stock with a $5 par value and a $40 fair value in exchange for all of Webstat Company’s outstanding voting shares. Webstat’s precombination book and fair values are shown below along with book values for TruData’s accounts.On its acquisition-date consolidated balance sheet, what amount should TruData report as goodwill?a. –0–b. $15,000c. $35,000d. $100,000arrow_forward
- Problems 15 through 18 are based on the following information:On July 1, TruData Company issues 10,000 shares of its common stock with a $5 par value and a $40 fair value in exchange for all of Webstat Company’s outstanding voting shares. Webstat’s precombination book and fair values are shown below along with book values for TruData’s accounts.On its acquisition-date consolidated balance sheet, what amount should TruData report as common stock?a. $70,000b. $300,000c. $350,000d. $370,000arrow_forwardProblems 15 through 18 are based on the following information:On July 1, TruData Company issues 10,000 shares of its common stock with a $5 par value and a $40 fair value in exchange for all of Webstat Company’s outstanding voting shares. Webstat’s precombination book and fair values are shown below along with book values for TruData’s accounts.On its acquisition-date consolidated balance sheet, what amount should TruData report as patented technology (net)?a. $200,000b. $230,000c. $410,000d. $430,000arrow_forwardAlmond acquires 80% of the share capital of Cashew on 1 August 20X6 and is preparing its group financial statements for the year ended 31 December 20X6. How will Cashew's results be included in the consolidated statement of financial position at 31 December 20X6? a. 80% of Cashew's assets and liabilities, time apportioned for the 4 months from 1 August 20X6 to 31 December 20X6 b. 80% of Cashew's assets and liabilities at 31 December 20X6 C. 100% of Cashew's assets and liabilities at 31 December 20X6 С. d. 100% of Cashew's assets and liabilities, time apportioned for the 4 months from 1 August 20X6 to 31 December 20X6arrow_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