Concept explainers
a.
Concept introduction
The consolidated balance sheet and the worksheets are the computed tools that are used to calculate the
To prepare: A
a.
Answer to Problem 2.27BP
The journal entry so passed gives a debit of investment and credit the cash with the same amount.
Explanation of Solution
Particular | Debit | Credit |
Cost method entry on books | ||
Investment in S co. | ||
Cash | ||
The initial investment in S co. income | ||
Cash | ||
Investment in the S co. | ||
Record P co. share in S co. dividend | ||
Total |
B.
Concept introduction
The consolidated balance sheet and the worksheets are the computed tools that are used to calculate the retained earnings and the dividend produced by the subsidiaries towards its parent company.
To prepare: the consolidated worksheet for the final values
B.
Answer to Problem 2.27BP
The consolidated worksheet is prepared and discussed.
Explanation of Solution
Book value calculation | |||||
Total book value | = | Common stock | + | Retained earnings | |
Initial book value |
Income statement | P | S | Dr. | Cr. | consolidated |
Sales | |||||
Less Cogs | |||||
Depreciation Exp | |||||
Sel. Exp | |||||
Income from S | |||||
Net income |
Statement of Retain Earning | P | S | Dr. | Cr. | Consolidated |
Opening balance | |||||
Net income | |||||
Less dividend declared | |||||
End balance |
Income statement | P co | S co | Eliminated DR | Eliminated CR | consolidated |
Cash | |||||
Accounts received | |||||
Inventory | |||||
Investment in S co | |||||
Land | |||||
Building and equipment | |||||
Less accumulated depreciation | |||||
Total assets | |||||
Account payable | |||||
Bonds | |||||
Common stocks | |||||
Retained earnings | |||||
Total liabilities |
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Chapter 2 Solutions
ADVANCED FINANCIAL ACCT.(LL)-W/CONNECT
- King Company owns a 90 percent interest in the outstanding voting shares of Pawn Company. No excess fair-value amortization resulted from the acquisition. Pawn reports a net income of $110,000 for the current year. Intra-entity sales occur at regular intervals between the two companies. Intra-entity gross profits of $30,000 were present in the beginning inventory balances, whereas $60,000 in similar gross profits were recorded at year-end. What is the noncontrolling interest’s share of consolidated net income?arrow_forwardStick Company reports net assets with a book value and fair value of $204,000. Paste Corporation acquires 75 percent ownership for $153,000. Paste reports net assets with a book value of $512,000 and a fair value of $633,000 at that time, excluding its investment in Stick. Required: For each of the following, compute the amounts that would be reported immediately after the combination under current accounting practice: Consolidated net identifiable assets. Noncontrolling interest.arrow_forwardCompute for the consolidated expenses to be reported for the year. On January 1, ABC Acquired 60 percent of the outstanding voting stock of XYZ for P301,500 cash consideration. The remaining 40 percent of XYZ had an acquisition date fair value of P138,500. On January 1, XYZ possessed equipment (5-year life) that was undervalued on its books P25,000.XYZ also had developed several secret formulas that ABC assessed at P50,000. Theses formulas, although not recorded on XYZ's financial records, were estimated to have a 20-year future life. ABC also determined that the inventory of XYZ is overvalued by P10,000. 80% of these inventories remain unsold by the end of the year. As of December 31, the financial statements appeared as follows:arrow_forward
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