Advanced Accounting
Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 5, Problem 5.2P
To determine

Concept Introduction:

Intercompany adjustments in consolidation: Inter-company receivables and payables are eliminated and subsidiary’s capital is also eliminated.

To prepare: The necessary worksheet for consolidation of given accounts.

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On January 1, 2015, Parker Company acquired 90% of the common stock of Stride Company for $351,000.On this date, Stride had common stock, other paid-in capital in excess of par, and retained earnings of $100,000, $40,000, and $210,000, respectively. The excess of cost over book value is due to goodwill. In both 2015 and 2016, Parker accounted for the investment in Stride using the cost method.On January 1, 2015, Stride sold $100,000 par value of 10-year, 8% bonds for $94,000. The bonds pay interest semiannually on January 1 and July 1 of each year. On December 31, 2015, Parker purchased all of Stride’s bonds for $98,200. The bonds are still held on December 31, 2016. Both companies correctly recorded all entries relative to bonds and interest, using straight-line amortization for premium or discount.The trial balances of Parker Company and its subsidiary were as follows on December 31, 2016: (see attachment)Prepare the worksheet necessary to produce the consolidated financial…
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On January 1, 2016, Uncle Company purchased 80 percent of Nephew Company’s capital stock for $500,000 in cash and other assets. Nephew had a book value of $600,000, and the 20 percent noncontrolling interest fair value was $125,000 on that date. On January 1, 2015, Nephew had acquired 30 percent of Uncle for $280,000. Uncle’s appropriately adjusted book value as of that date was $900,000.Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $20,000 in dividends to shareholders each year and Nephew distributes $5,000 annually. Any excess fair-value allocations are amortized over a 10-year period. Year Uncle Company Nephew Company 2016 $90000 $30000 2017 120000 40000 2018 140000 50000 a. Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiary’s income recognized by Uncle in 2018?b. What is the net income attributable to the noncontrolling…
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