ADVANCED ACCT W/CONNECT >CUSTOM<
18th Edition
ISBN: 9781307261721
Author: Hoyle
Publisher: Mcgraw-Hill/Create
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Question
Chapter 4, Problem 44P
a.
To determine
Show the
a.
Expert Solution
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.
To determine
Prepare a schedule showing how Company B determined the Investment in Company K balance as of December 31, 2018.
b.
Expert Solution
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.
To determine
Prepare a consolidated worksheet for Company B, and Company K for December 31, 2018.
c.
Expert Solution
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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