Subsidiary’s shares transactions: 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. Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is rare in practice. The method of dealing with reciprocal relationships found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method as such investments usually are small and almost never has the ability to significantly influence parent. Requirement 1 Computation of book value of shares held by A and record the entry in A’s books to record the change in book value of its investment in B’s shares.

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Answer 1

Question

Chapter 9, Problem 9.23P

To determine

Subsidiary’s shares transactions: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.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is rare in practice. The method of dealing with reciprocal relationships found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method as such investments usually are small and almost never has the ability to significantly influence parent.

Requirement 1

Computation of book value of shares held by A and record the entry in A’s books to record the change in book value of its investment in B’s shares.

b.

To determine

Subsidiary’s shares transactions: 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.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is rare in practice. The method of dealing with reciprocal relationships found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method as such investments usually are small and almost never has the ability to significantly influence parent.

Requirement 2

The Computation of book value, entries in books of B and consolidation entries in case of direct purchase from A on January 1. 20X7.

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Current Attempt in Progress On January 1, Vermillion Corporation, a private company that reports under ASPE, purchased 25% of Hook Ltd. common shares for $731,000. At December 26, Hook declared a $40,000 dividend (Vermillion received its share of that dividend on the same day) and reported net income of $72,000. The shares' fair value at December 31 was $769,000. It has chosen to account for its investment in Hook Ltd, using the cost model because the shares do not trade in an active market. Record each of the transactions and any necessary adjusting journal entries under this assumption. (List all debit entries before credit entries, Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Jan. 1 Dec. 26 # How much income would Vermillion now report for the year? Income $ Debit Credit

Aa.14.

Answer 2

Question

Chapter 9, Problem 9.23P

To determine

Subsidiary’s shares transactions: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.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is rare in practice. The method of dealing with reciprocal relationships found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method as such investments usually are small and almost never has the ability to significantly influence parent.

Requirement 1

Computation of book value of shares held by A and record the entry in A’s books to record the change in book value of its investment in B’s shares.

b.

To determine

Subsidiary’s shares transactions: 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.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is rare in practice. The method of dealing with reciprocal relationships found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method as such investments usually are small and almost never has the ability to significantly influence parent.

Requirement 2

The Computation of book value, entries in books of B and consolidation entries in case of direct purchase from A on January 1. 20X7.

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Answer 3

Question

Chapter 9, Problem 9.23P

To determine

Subsidiary’s shares transactions: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.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is rare in practice. The method of dealing with reciprocal relationships found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method as such investments usually are small and almost never has the ability to significantly influence parent.

Requirement 1

Computation of book value of shares held by A and record the entry in A’s books to record the change in book value of its investment in B’s shares.

b.

To determine

Subsidiary’s shares transactions: 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.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is rare in practice. The method of dealing with reciprocal relationships found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method as such investments usually are small and almost never has the ability to significantly influence parent.

Requirement 2

The Computation of book value, entries in books of B and consolidation entries in case of direct purchase from A on January 1. 20X7.

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Answer 4

Question

Chapter 9, Problem 9.23P

To determine

Subsidiary’s shares transactions: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.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is rare in practice. The method of dealing with reciprocal relationships found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method as such investments usually are small and almost never has the ability to significantly influence parent.

Requirement 1

Computation of book value of shares held by A and record the entry in A’s books to record the change in book value of its investment in B’s shares.

b.

To determine

Subsidiary’s shares transactions: 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.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is rare in practice. The method of dealing with reciprocal relationships found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method as such investments usually are small and almost never has the ability to significantly influence parent.

Requirement 2

The Computation of book value, entries in books of B and consolidation entries in case of direct purchase from A on January 1. 20X7.

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Answer 5

Chapter 9, Problem 9.23P

To determine

Subsidiary’s shares transactions: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.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is rare in practice. The method of dealing with reciprocal relationships found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method as such investments usually are small and almost never has the ability to significantly influence parent.

Requirement 1

Computation of book value of shares held by A and record the entry in A’s books to record the change in book value of its investment in B’s shares.

b.

To determine

Subsidiary’s shares transactions: 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.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is rare in practice. The method of dealing with reciprocal relationships found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method as such investments usually are small and almost never has the ability to significantly influence parent.

Requirement 2

The Computation of book value, entries in books of B and consolidation entries in case of direct purchase from A on January 1. 20X7.

Answer 6

Chapter 9, Problem 9.23P

To determine

Subsidiary’s shares transactions: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.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is rare in practice. The method of dealing with reciprocal relationships found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method as such investments usually are small and almost never has the ability to significantly influence parent.

Requirement 1

Computation of book value of shares held by A and record the entry in A’s books to record the change in book value of its investment in B’s shares.

Answer 7

Chapter 9, Problem 9.23P

To determine

Subsidiary’s shares transactions: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.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is rare in practice. The method of dealing with reciprocal relationships found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method as such investments usually are small and almost never has the ability to significantly influence parent.

Requirement 1

Computation of book value of shares held by A and record the entry in A’s books to record the change in book value of its investment in B’s shares.

Answer 8

b.

To determine

Subsidiary’s shares transactions: 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.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is rare in practice. The method of dealing with reciprocal relationships found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method as such investments usually are small and almost never has the ability to significantly influence parent.

Requirement 2

The Computation of book value, entries in books of B and consolidation entries in case of direct purchase from A on January 1. 20X7.

Answer 9

b.

To determine

Subsidiary’s shares transactions: 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.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is rare in practice. The method of dealing with reciprocal relationships found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method as such investments usually are small and almost never has the ability to significantly influence parent.

Requirement 2

The Computation of book value, entries in books of B and consolidation entries in case of direct purchase from A on January 1. 20X7.

Answer 10

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Answer 13

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 how a subsidiary purchases treasury shares from non-controlling shareholders. Reciprocal ownership is when two companies hold stock in each other.

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