Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Question
Chapter 9, Problem 9.24P
To determine
Sale of subsidiary common shares:When parent sells subsidiary shares, a gain or loss normally occurs and is recorded on the seller’s books, which needs to be recognized in consolidated net income. Under ASE 810, changes in a parent’s ownership interest in a subsidiary while the parent retains control require an adjustment to the amount assigned to the non-controlling interest to reflect its change in ownership in subsidiary. Any difference in fair value of the controlling interest results in an adjustment to the
The consolidation entries needed to complete work sheet for 20X4.
Expert Solution
Answer to Problem 9.24P
| Debit | Credit | |
| 1. Eliminate gain on sale of S shares | ||
| Gain on sale of S company stock | 10,000 | |
| Additional paid-in capital | 10,000 | |
| 2. Eliminate income from subsidiary | ||
| Income from subsidiary | 18,000 | |
| Dividends declared | 9,000 | |
| Investment in S stock | 12,000 | |
| 3. Assign income to non-controlling interest | ||
| Income to non-controlling interest | 12,000 | |
| Dividends declared | 4,000 | |
| Non-controlling interest | 8,000 | |
| 4. Eliminate investment in common stock | ||
| Common stock S company | 100,000 | |
| Additional paid-in capital | 20,000 | |
| 130,000 | ||
| Investment in S company stock | 150,000 | |
| Non-controlling interest | 100,000 |
Explanation of Solution
- Gain on sale of common stock is eliminated by debiting to gain on sale and credit of additional paid-in capital.
- Income from subsidiary is eliminated by reversing the transaction by debiting it and credit of investment in company stock
- Income assigned to non-controlling interest is recognized by debit to income assigned to non-controlling interest and credit to dividends declared and non-controlling interest.
- To eliminate investment in common stock, common stock in S and additional paid in capital is debited and investment in S stock and non-controlling interest is credited.
To determine
Sale of subsidiary common shares:When parent sells subsidiary shares, a gain or loss normally occurs and is recorded on the seller’s books, which needs to be recognized in consolidated net income. Under ASE 810, changes in a parent’s ownership interest in a subsidiary while the parent retains control require an adjustment to the amount assigned to the non-controlling interest to reflect its change in ownership in subsidiary. Any difference in fair value of the controlling interest results in an adjustment to the stockholders equity attributable to the controlling interest, through an adjustment to additional paid-in capital.
The preparation of consolidation worksheet for 20X4.
Expert Solution
Answer to Problem 9.24P
Balance of liability and equity in consolidation worksheet 20X4 $1,000,000.
Explanation of Solution
P and S Company
Consolidation worksheet
December 31, 20X4
| elimination | |||||
| P | S | Debit | Credit | Consolidation | |
| Sales | 280,000 | 170,000 | 450,000 | ||
| Gain on sale of E stock | 10,000 | 10,000 | |||
| Income from subsidiary | 18,000 | 18,000 | |||
| Net sales | 308,000 | 170,000 | 28,000 | 450,000 | |
| Less: cost of sales | (210,000) | (100,000) | (310,000) | ||
| (20,000) | (15,000) | (35,000) | |||
| Other expense | (21,000) | (25,000) | (46,000) | ||
| Income to NCI | 12,000 | (12,000) | |||
| Net income | 57,000 | 30,000 | 40,000 | 47,000 | |
| Retained earnings: | |||||
| Balance January 1 | 320,000 | 130,000 | 130,000 | 320,000 | |
| Net income | 57,000 | 30,000 | 40,000 | 47,000 | |
| Less dividends declared | (15,000) | (10,000) | 6,000 | ||
| 4,000 | (15,000) | ||||
| Ending balance | 362,000 | 150,000 | 170,000 | 10,000 | 352,000 |
| Cash | 30,000 | 35,000 | 65,000 | ||
| 70,000 | 50,000 | 120,000 | |||
| Inventory | 120,000 | 100,000 | 220,000 | ||
| Buildings and equipment | 650,000 | 230,000 | 880,000 | ||
| Less depreciation | (170,000) | (95,000) | (265,000) | ||
| Total Assets | 862,000 | 320,000 | 1,020,000 | ||
| Accounts payable | 50,000 | 20,000 | 70,000 | ||
| Bonds payable | 200,000 | 30,000 | 230,000 | ||
| Common stock | 200,000 | 100,000 | 100,000 | 200,000 | |
| Additional paid in cap | 50,000 | 20,000 | 20,000 | 10,000 | 60,000 |
| Retained earnings | 362,000 | 150,000 | 170,000 | 10,000 | 352,000 |
| NCI | 8,000 | ||||
| 100,000 | 108,000 | ||||
| Liability and equity | 862,000 | 320,000 | 1,020,000 | ||
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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 - 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
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