Question 7 Correct Mark 10.00 out of 10.00Effect on consolidated net income of acquisition of affiliate's debt from non-affiliateA Parent Company owns 100 percent of its Subsidiary. During 2021, the Parent company reports net income (by itself, without any investment income from its Subsidiary) of $540,000 and the subsidiary reportsnet income of $216,000. The parent had a bond payable outstanding on January 1, 2021, with a carrying value equal to $453,600. The Subsidiary acquired the bond on January 1, 2021, for $426,600 During 2021,the Parent reported interest expense (related to the bond) of $37,800 while the Subsidiary reported interest income (related to the bond) of $34,560. What is consolidated net income for the year endedDecember 31, 2021?Select one:a. $783,000b. $756,000c. $759,240d. $786,240Remove flagCheck

The objective of the question is to calculate the consolidated net income for the year ended…

Answered: Question 7 Correct Mark 10.00 out of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question 4 Assume that Company A acquires 70 per cent of Company B for a cash price of $14 million when the share capital and reserves of Company B are: Share capital $8 million Retained earnings $2 million $10 million 1)What amount of goodwill will be shown in the consolidated statement of financial position pursuant to AASB 3 assuming that any non-controlling interest in the acquirer is measured at fair value? 2)What amount of goodwill will be shown in the consolidated statement of financial position pursuant to AASB 3 assuming that any non-controlling interest in the acquirer is measured at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets? 3)Pass the necessary consolidation journal entries and the journal entries to record the non-controlling interest if the non-controlling interest in the…
Effect on consolidated net income of acquisition of affiliate’s debt from non-affiliate A Parent Company owns 100 percent of its Subsidiary. During 2021, the Parent company reports net income (by itself, without any investment income from its Subsidiary) of $450,000 and the subsidiary reports net income of $180,000. The parent had a bond payable outstanding on January 1, 2021, with a carrying value equal to $378,000. The Subsidiary acquired the bond on January 1, 2021, for $355,500 During 2021, the Parent reported interest expense (related to the bond) of $31,500 while the Subsidiary reported interest income (related to the bond) of $28,800. What is consolidated net income for the year ended December 31, 2021? Select one: a. $655,200 b. $630,000 c. $632,700 d. $652,500
Question 30 Power Corporation's controller has just finished preparing a consolidated balance sheet, income statement, and statement of changes in retained earnings for the year ended December 31, 20X9. Power owns 80 percent of Setwork Corporation's stock, which it acquired at underlying book value on November 1, 20X6. At that date, the fair value of the noncontrolling interest was equal to 20 percent of Setwork Corporation's book value. The following information is available: Consolidated net income for 20X9 was $160,000. Setwork reported net income of $50,000 for 20X9. Power paid dividends of $30,000 in 20X9. Setwork paid dividends of $10,000 in 20X9. Power issued common stock on February, 18, 20X9, for a total of $100,000. Consolidated wages payable decreased by $6,000 in 20X9. Consolidated depreciation expense for the year was $15,000. Consolidated accounts receivable decreased by $20,000 in 20X9. Bonds payable of Power with a book value of $102,000 were retired for $100,000 on…
3-Assume that a Parent company owns 100% of its Subsidiary. On January 1, 2020 the Parent company had a $2,000,000 (face) bond payable outstanding with a carrying value of $2,140,000. The bond was originally issued to an unaffiliated company. On that same date, the Subsidiary acquired the bond for $1,992,000. During 2020, the Parent company reported $1,260,000 of (pre-consolidation) income from its own operations (i.e. prior to any equity method adjustments by the Parent company) and after recording interest expense. The Subsidiary reported $840,000 of (pre-consolidation) income from its own operations after recording interest income. Related to the bond during 2020, the parent reported interest expense of $220,000 while the subsidiary reported interest income of $190,000. Required: Determine the following amounts that will appear in the 2020 consolidated income statements. a. Interest income from bond investmentb. Interest expense on bond payablec. Gain (loss) on constructive…
Question 6: Intra-group transaction Question (worksheet adjustment entries for the following independent transactions) Sydney Ltd owns all of the shares of Mel Ltd. In relation to the following intragroup transactions, all parts of which are independent unless specified, prepare the consolidation worksheet adjusting entries for preparation of the consolidated financial statements as at 30 June 2019. Assume an income tax rate of 30%. (a) SYD Ltd sold inventory to MEL Ltd on 1 September 2018 for $30 000. This inventory had cost SYD Ltd $18 000. One-third of the inventory was sold by Mel Ltd to QLD Ltd for $14 000 and one-third to ADL Ltd for $14 200. (b) SYD Ltd manufactures certain items which it then markets through MEL Ltd. During the current period, SYD Ltd sold items for $20 000 to MEL Ltd at cost plus 20%. MEL Ltd has sold 75% of these transferred items at 30 June 2019. (c) During June 2019, MEL Ltd declared a $3000 dividend. The dividend was paid in August 2020. (d)…
QUESTION 24 On January 3, 20X9, Pleat Company acquired 80 percent of Stitch Corporation's common stock for $344,000 in cash. At the acquisition date, the book values and fair values of Stitch's assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 20 percent of the total book value of Stitch. The stockholders' equity accounts of the two companies at the acquisition date are: Pleat Stitch Common Stock ($5 par value) $ 500,000 $ 200,000 Additional Paid-In Capital 300,000 80,000 Retained Earnings 350,000 150,000 Total Stockholders' Equity $ 1,150,000 $ 430,000 Noncontrolling interest was assigned income of $11,000 in Pleat's consolidated income statement for 20X9.Based on the preceding information, what will be the amount of net income reported by Stitch Corporation in 20X9? $44,000 $66,000 $36,000 $55,000
QUESTION 23 On January 3, 20X9, Pleat Company acquired 80 percent of Stitch Corporation's common stock for $344,000 in cash. At the acquisition date, the book values and fair values of Stitch's assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 20 percent of the total book value of Stitch. The stockholders' equity accounts of the two companies at the acquisition date are: Pleat Stitch Common Stock ($5 par value) $ 500,000 $ 200,000 Additional Paid-In Capital 300,000 80,000 Retained Earnings 350,000 150,000 Total Stockholders' Equity $ 1,150,000 $ 430,000 Noncontrolling interest was assigned income of $11,000 in Pleat's consolidated income statement for 20X9.Based on the preceding information, what amount will be assigned to the noncontrolling interest on January 3, 20X9, in the consolidated balance sheet? $50,000 $68,800 $44,000 $86,000
QUESTION 25 On January 3, 20X9, Pleat Company acquired 80 percent of Stitch Corporation's common stock for $344,000 in cash. At the acquisition date, the book values and fair values of Stitch's assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 20 percent of the total book value of Stitch. The stockholders' equity accounts of the two companies at the acquisition date are: Pleat Stitch Common Stock ($5 par value) $ 500,000 $ 200,000 Additional Paid-In Capital 300,000 80,000 Retained Earnings 350,000 150,000 Total Stockholders' Equity $ 1,150,000 $ 430,000 Noncontrolling interest was assigned income of $11,000 in Pleat's consolidated income statement for 20X9.Based on the preceding information, what is the total stockholders' equity in the consolidated balance sheet as of January 3, 20X9? $1,236,000 $1,150,000 $1,580,000 $1,064,000
Effect on consolidated net income of acquisition of affiliate's debt from non-affiliate A Parent Company owns 100 percent of its Subsidiary. During 2018, the Parent company reports net income (by itself, without any investment income from its Subsidiary) of $1,050,000 and the subsidiary reports net income of $420,000. The parent had a bond payable outstanding on December 31, 2018, with a carrying value equal to $882,000. The Subsidiary acquired the bond on December 31, 2018 for $829,500. During 2018, the Parent reported interest expense (related to the bond) of $73,500 while the Subsidiary reported no interest income (related to the bond). What is consolidated net income for the year ended December 31, 2018? $1,543,500 $1,470,000 $1,596,000 $1,522,500
Question 31 Parent acquires a 60% interst in a target company for $ 1,500. The tangible assets of the target are valued at $1,600 and tangible liabilities of the target are valued at $400. Assume the noncontrolling interest is valued on a per share basis at the same value as the parent's controlling interest. What is the amount of the goodwill from the acquisition? $300 $1,300 $1,000 zero
QUESTION 17 On January 1, 20X9, Pirate Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Pirate Corp. Sea-Gull Corp. Cash $ 60,000 $ 20,000 Accounts Receivable 80,000 30,000 Inventory 90,000 40,000 Land 100,000 40,000 Buildings and Equipment 200,000 150,000 Less: Accumulated Depreciation (80,000 ) (50,000 ) Investment in Sea-Gull Corp. 160,000 Total Assets $ 610,000 $ 230,000 Accounts Payable $ 110,000 $ 30,000 Bonds Payable 95,000 40,000 Common Stock 200,000 40,000 Retained Earnings 205,000 120,000 Total Liabilities…
Question 17 Pain Corporation holds 90 percent of Soothing Company's common shares but none of its preferred shares. On the date of acquisition, the fair value of the noncontrolling interest was equal to 10 percent of the book value of Soothing Company. Summary balance sheets for the companies on December 31, 20X8, are as follows: Pain Corporation Soothing Company Cash and Receivables $ 80,000 $ 70,000 Inventory 40,000 30,000 Buildings and Equipment (net) 160,000 150,000 Investment in Soothing Company 135,000 0 Total Assets $ 415,000 $ 250,000 Accounts Payable 50,000 $ 25,000 Preferred Stock ($10 par value) 50,000 75,000 Common Stock ($5 par value) 100,000 50,000 Retained Earnings 215,000 100,000 Total Liabilities and Owners’ Equity $ 415,000 $ 250,000 Pain's preferred pays a 8 percent annual dividend, and Soothing's…

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