Concept explainers
a.
To compute: The book value of all the assets transferred by the parent to subsidiary.
Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).
b.
To compute: The amount that parent would report as investment in subsidiary.
Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).
c.
To compute: The number of shares that subsidiary company issued to parent.
Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).
d.
To discuss: The impact that transfer of assets and accounts payable would have on the amount reported by parent company as total assets.
Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).
e.
To explain: The effect that transfer of assets and accounts payable would have, on the amount of outstanding shares, reported by the stand alone and consolidated financial statements of parent company.
Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).
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ADVANCED FIN.ACCT.(LL)-W/ACCESS>CUSTOM<
- White Bright Limited has three subsidiary Companies as on 31st March, 2018. Based upon the information given in the following, ascertain how the Cost of Investment will be treated in the Consolidated Balance Sheet. Particulars Amount in Millions Hazy Limited Clear Limited Sun Limited Investment made 205.00 117.00 145.00 Percent of Shares Owned 60% 65% 75% Assets at the time of Investment 625.40 314.84 443.75 Liabilities at the time of Investment 260.44 134.84 329.55 don't give hand written answers plzarrow_forwardA wholly owned subsidiary declared dividend and half remains unpaid bythe end of the year, which of the following is TRUE? a. Only half of the amount of the dividend will be used to reduce the profit ofthe parent for consolidation purposes. b. The total amount of the dividend will be eliminated in the working paperelimination entry by debiting “dividend revenue” account.c. The transaction will have an impact in the computation of the balance ofNCI at the end.d. The elimination entry will include a debit to non-controlling interest for theamount of dividend received by the non-controlling shareholders.arrow_forwardComputing the noncontrolling interests equity balance Assume the following facts relating to an 90% owned subsidiary company: BOY stockholders’ equity $900,000 BOY AAP assets 117,000 Net income of subsidiary (not including [A] asset depreciation and amortization) 216,000 AAP assets depreciation and amortization expense 36,000 Dividends declared and paid by subsidiary 18,000 b. Compute the amount reported as noncontrolling equity at the end of the year. $Answerarrow_forward
- This is a sample CPA FAR question: Company ABC recently acquired a subsidiary and needs to prepare consolidated financial statements. The subsidiary has assets worth $2 million, liabilities of $800,000, and common stock of $600,000. The non-controlling interest in the subsidiary is 20%. What is the consolidated value of the subsidiary's liabilities that should be reported? A) $800,000 B) $640,000 C) $520,000 D) $480,000 Please don't provide answer in image format thank youarrow_forwardParent Ltd (Parent) controls a subsidiary Sub Ltd (Sub), in which it owns 70 per cent of the issued capital since 30 June 20X3. The following transactions are relevant for the preparation of the consolidated financial statements for the financial year ending 30 June 20X7. Transaction 1: During the financial year ending 30 June 20X4, Sub sold an item of plant to Parent at a loss. Parent is still using the plant at 30 June 20X7. Transaction 2: Sub paid an interim dividend in August 20X5. Parent is exempt from income tax on dividends received from the subsidiary. Transaction 3: During the financial year ending 30 June 20X7, Parent sold inventory to Sub for a price greater than its cost to Parent. One-third of this inventory is still on hand at 30 June 20X7. Transaction 4: On 1 November 20X6, Parent borrowed $50 000 from Sub at an interest rate of 10 per cent per annum. The interest on the loan is payable every six months starting 1 May 20X7. The loan is still outstanding at 30 June…arrow_forwardardner Corp. owns 80% of the voting common stock of Lockhart Co. Lockhart owns 70% of Canning Co. Gardner and Lockhart both use the initial value method to account for their investments. The following information is available from the financial statements and records of the three companies: GardnerCorp. LockhartCo. CanningCo. Separate company net income before investment income $900,000 $650,000 $150,000 Dividend income from investment in subsidiary 250,000 120,000 Deferral of intra-entity gains 110,000 80,000 20,000 Amortization expense related to excess fair value over book value of investment 40,000 25,000 Separate company net income includes intra-entity gains before the consolidating deferral but does not include dividend income from investment in subsidiary. The accrual-based net income of Gardner Corp. is calculated to bearrow_forward
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- Answer for question B ( i, ii, iii, iv) is required. On 1 January 2015, Star Ltd acquired 75% of the ordinary shares of Shine Ltd in Hong Kong to form Star-Shine Group (SSG). At that date the balance on the retained earnings of Shine Ltd was Hong Kong Dollars (HK$) 1,700,000. The non-controlling interest in Shine was measured as the proportionate share of the net assets of the subsidiary. No shares have been issued by Shine since acquisition. The summarised income statements and balance sheets of Star Ltd and Shine Ltd as at 31 December 2019 were as follows: Income Statement for the year ended 31 December 2019 Star Shine GB£ HK$ Sales 37,422,000 9,504,000 Opening inventories 4,158,000 1,259,280 Purchases 20,790,000 5,346,000 Closing inventories 1,485,000 1,021,680 Cost of sales 23,463,000 5,583,600 Gross…arrow_forwardCompany Aero is about to acquire 100% of company Berry. Company Berry has identifiable net assets with book value of $300,000 and $500,000 respectively. As payment Company Aero will issue common stock with a fair value of $75,000. How should the transaction be recorded if the acquisition is:a) An acquisition of net assets?b) An acquisition of Company B’s common stock and Company B remains a separate legal entity?arrow_forward(Consolidation – Wholly Owned Subsidiary) On 1 July 2020, Kent Ltd acquired all the share capital (Ex-dividend) of Sub Ltd for $500,000. The financial statements of Kent Ltd showed the equity of Sub Ltd at that date to be: Share capital — 60 000 $5 shares $300 000 General reserve 40 000 Retained earnings 90 000 All the assets and liabilities of Sub Ltd were recorded at amounts equal to their fair values at that date except the following: Carrying Amount Fair value Land $150 000 $170 000 Plant (Cost $400 000) $300 000 $350 000 Inventory $75 000 $80 000 Additional information: On 10 September 2020, Sub Ltd paid interim cash dividend of $10,000. At acquisition date, 1 July 2020, Sub Ltd has an unrecorded…arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning