Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Chapter 9, Problem 9.9E
(a)
To determine
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
The
(a)
Expert Solution
Explanation of Solution
Journal entries recorded by B company for its investment in C company is as follows:
| Date | Particulars | Debit ($) | Credit ($) |
| January 1, 20X3 | Investment in C company's stock | 120,000 | |
| To cash | 120,000 | ||
| (Recording entry for purchase of stock of C company by B company) | |||
| December 31, 20X3 | Cash | 9000 | |
| To Investment in C company's stock ($15000*60%) | 9000 | ||
| (Recording entry for receiving dividend from C company) | |||
| December 31, 20X3 | Investment in C company's stock | 24,000 | |
| To Income from C company ($40,000*60%) | 24,000 | ||
| (Recording entry for receiving income from C company on investment) |
(b)
To determine
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
The journal entries recorded by A company for its investment in B company.
(b)
Expert Solution
Explanation of Solution
Journal entries recorded by A company for its investment in B company is as follows:
| Date | Particulars | Debit ($) | Credit ($) |
| January 1, 20X3 | Investment in B company's stock | 315,000 | |
| To cash | 315,000 | ||
| (Recording entry for purchase of stock of B company by A company) | |||
| December 31, 20X3 | Cash | 45,000 | |
| To Investment in B company's stock ($50000*90%) | 45,000 | ||
| (Recording entry for receiving dividend from B company) | |||
| December 31, 20X3 | Investment in B company's stock | 129,600 | |
| To Income from B company ($120,000+$24000) *90%) | 129,600 | ||
| (Recording entry for receiving income from C company on investment) |
(c)
To determine
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
The consolidated entries related to B company’s investment in C company and A company’s investment in B company.
(c)
Expert Solution
Explanation of Solution
Consolidated entries related to B company’s investment in C company is as follows:
| Date | Particulars | Debit ($) | Credit ($) |
| December 31, 20X3 | Common stock | 100,000 | |
| Additional capital | 60,000 | ||
| 40,000 | |||
| Income from C company | 24,000 | ||
| Non-controlling interest of C company | 16,000 | ||
| To Dividend declared | 15,000 | ||
| To Investment in C company | 135,000 | ||
| Non-controlling interest in Net asset of C company | 90,000 | ||
| (Consolidated entry of investment in C company by B company) |
Working Note:
| Particulars | NCI 40% | B company 60% | = | Common Stock + | Additional Paid-In Capital + | Retained Earnings |
| Original book value | $80,000 | $1,20,000 | = | $1,00,000 | $60,000 | $40,000 |
| + Net Income | $16,000 | $24,000 | = | $40,000 | ||
| - Dividends | ($6,000.00) | ($9,000) | = | ($15,000) | ||
| Ending book value | $90,000 | $1,35,000 | = | $1,00,000 | $60,000 | $65,000 |
Consolidated journal entries related to A company’s investment in B company is as follows:
| Date | Particulars | Debit ($) | Credit ($) |
| December 31, 20X3 | Common stock | 150000 | |
| Additional capital | 60000 | ||
| Retained earnings | 140000 | ||
| Income from C company | 129600 | ||
| Non-controlling interest of B company | 14400 | ||
| To Dividend declared | 50000 | ||
| To Investment in B company | 399600 | ||
| Non-controlling interest in Net asset of B company | 44400 | ||
| (Consolidated entry of investment in B company by A company) |
Working note:
| Particulars | NCI 10% | A company 90% | = | Common Stock + | Additional Paid-In Capital + | Retained Earnings |
| Original book value | $35,000 | $3,15,000 | = | $1,50,000 | $60,000 | $1,40,000 |
| + Net Income | $14,400 | $1,29,600 | = | $1,44,000 | ||
| - Dividends | ($5,000.00) | ($45,000) | = | ($50,000) | ||
| Ending book value | $44,400 | $3,99,600 | = | $1,50,000 | $60,000 | $2,34,000 |
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Holder Inc acquired 150,000 $1 ordinary shares in Sub Inc on 1 July 20X6 at a cost of
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Penny Manufacturing Company acquired 75 percent of Saul Corporation stock at underlying book value. At the date of acquisition, the fair value of the noncontrolling interest was equal to 25 percent of Saul’s book value. The balance sheets of the two companies for January 1, 20X1, are as follows:
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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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