Concept explainers
a.
Show the
a.
Explanation of Solution
The journal entry Company B made to record its January 1, 2018, acquisition of an additional 30 percent of Company K shares:
Date | Accounts Title and Explanation | Post Ref. | Debit ($) | Credit ($) |
Investment in Company K | $ 301,500 | |||
Cash | $ 300,000 | |||
Additional paid-in Capital from step acquisition | $ 1,500 | |||
(to record allocation of additional 30% investment) |
Table: (1)
b.
Prepare a schedule showing how Company B determined the Investment in Company K balance as of December 31, 2018.
b.
Explanation of Solution
The schedule showing how Company B determined Investment in Company K balances as of December 31, 2018:
Particulars | Amount |
Investment in Company K on 01/01/17 | $ 573,000 |
Equity earnings in 2017 | $ 78,000 |
Dividends in 2017 | $ (48,000) |
Additional acquisition of 30% | $ 301,500 |
Equity earnings in 2018 | $ 144,000 |
Dividends in 2018 | $ (54,000) |
Investment in Company K on 12/31/18 | $ 994,500 |
Table: (2)
c.
Prepare a consolidated worksheet for Company B, and Company K for December 31, 2018.
c.
Explanation of Solution
The consolidated worksheet for Company B, and Company K for December 31, 2018:
Income statement | Company B | Company K | Debit | Credit | Non-controlling interest | Consolidated Balances |
Revenues | $ (402,000) | $ (300,000) | $ (702,000) | |||
Operating expense | $ 200,000 | $ 120,000 | E 20,000 | $ 340,000 | ||
Equity in income of Company K | $ (144,000) | I 144,000 | $ - | |||
Net income | $ (346,000) | $ (180,000) | ||||
Consolidated net income | $ (362,000) | |||||
Share of non-controlling interest in net income | $ (16,000) | $ 16,000 | ||||
Share of controlling interest in net income | $ (346,000) | |||||
Balance Sheet | ||||||
Current assets | $ 224,000 | $ 190,000 | $ 414,000 | |||
Investment in Company K | $ 994,500 | $ - | D 54,000 | $ 792,000 | ||
$ 112,500 | ||||||
$ 144,000 | ||||||
Trademarks | $ 106,000 | $ 600,000 | $ 706,000 | |||
Copyrights | $ 210,000 | $ 300,000 | A 100,000 | E 20,000 | $ 590,000 | |
Equipment | $ 380,000 | $ 110,000 | $ 490,000 | |||
| $ - | A 25,000 | $ 25,000 | |||
Total assets | $ 1,914,500 | $ 1,200,000 | $ 2,225,000 | |||
Liabilities | $ (453,000) | $ (200,000) | $ (653,000) | |||
Common stock | $ (400,000) | $ (300,000) | $ 300,000 | $ (400,000) | ||
Additional paid-in capital | $ (60,000) | $ (80,000) | $ 80,000 | $ (60,000) | ||
Additional paid-in capital step-acquisition | $ (1,500) | $ (1,500) | ||||
| $ (1,000,000) | $ (620,000) | $ (1,000,000) | |||
Non-controlling interest in Company K | S $12,500 | |||||
A $88,000 | $ (100,500) | |||||
$ (100,500) | $ (100,500) | |||||
Total liabilities and equity | $ (1,914,500) | $ (1,200,000) | $ 1,223,000 | $ 1,223,000 | $ 2,225,000 |
Table: (3)
Working note:
Statement of retained earnings | Company B | Company K | Debit | Credit | Non-controlling interest | Consolidated Balances |
Retained earnings on 01/01 | $ (797,000) | $ (500,000) | $ 500,000 | $ (797,000) | ||
Net Income | $ (346,000) | $ (180,000) | $ (346,000) | |||
Dividends declared | $ 143,000 | $ 60,000 | D 54,000 | $ 6,000 | $ 143,000 | |
Retained earnings on 31/12 | $ (1,000,000) | $ (620,000) | $ (1,000,000) |
Table: (4)
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