Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 5, Problem 5.3.2C
To determine
Introduction: Consolidated income statement is the combination of income, revenue and expenses of holding companies and its subsidiaries depicting the overall scenario of the aggregate of the company as a whole.
To prepare:Aconsolidated income statement and balance sheet for the company for 2016.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Born Company acquires an 80% interest in Roland Company for $660,000 cash on January 1, 2017. The NCI has a fair value of $165,000. Any excess of cost over book value is attributed to goodwill. To help pay for the acquisition, Born Company issues 5,000 shares of its common stock with a fair value of $70 per share. Roland’s balance sheet on the date of the purchase is as follows:
Assets
Liabilities and Equity
Cash . . . . . . . . . . . . . . . . . . . . $ 20,000
Inventory . . . . . . . . . . . . . . . . 140,000
Property, plant, andequipment (net). . . . . . . . . . 550,000
Total assets . . . . . . . . . . . . . $710,000
Current liabilities . . . . . . . $110,000
Bonds payable . . . . . . . . . 100,000
Common stock ($10 par) . . 200,000
Retained earnings . . . . .. . . 300,000
Total liabilities and equity $710,000
Controlling share of net income for 2017 is $150,000, net of the noncontrolling interest of $10,000. Born declares and pays dividends of $10,000, and Roland…
Problems 7 and 8 relate to the following:
On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc., for $540,000 cash. The acquisition-date fair value of the noncontrolling interest was $60,000. At January 1, 2016, Star’s net assets had a total carrying amount of $420,000. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $80,000. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $70,000 in 2016 and $80,000 in 2017. Each year since the acquisition, Star has declared a $20,000 dividend. At January 1, 2018, Pride’s retained earnings show a $250,000 balance.
Selected account balances for the two companies from their separate operations were as follows
Assuming that Pride, in its internal records, accounts for its investment in Star using the equity method, what amount of…
Problems 7 and 8 relate to the following:
On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc., for $540,000 cash. The acquisition-date fair value of the noncontrolling interest was $60,000. At January 1, 2016, Star’s net assets had a total carrying amount of $420,000. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $80,000. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $70,000 in 2016 and $80,000 in 2017. Each year since the acquisition, Star has declared a $20,000 dividend. At January 1, 2018, Pride’s retained earnings show a $250,000 balance.
Selected account balances for the two companies from their separate operations were as follows
What is consolidated net income for 2018?
a. $194,000
b. $197,500
c. $203,000
d. $238,000
Chapter 5 Solutions
Advanced Accounting
Ch. 5 - Prob. 1UTICh. 5 - Subsidiary Company S has $1000,000 of bonds...Ch. 5 - Plessor Industries acquired 80% of the outstanding...Ch. 5 - Company P purchased $100,000 of subsidiary Company...Ch. 5 - Prob. 5UTICh. 5 - Prob. 6UTICh. 5 - Prob. 7UTICh. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Prob. 3.1E
Ch. 5 - Prob. 3.2ECh. 5 - Prob. 4ECh. 5 - Carlton Company is an 80%- owned subsidiary of...Ch. 5 - Carlton Company is an 80%- owned subsidiary of...Ch. 5 - Prob. 6.1ECh. 5 - Prob. 6.2ECh. 5 - Prob. 7.1ECh. 5 - Prob. 7.2ECh. 5 - Prob. 7.3ECh. 5 - Prob. 8.1ECh. 5 - Prob. 8.3ECh. 5 - Prob. 9ECh. 5 - Prob. 5.1.1PCh. 5 - Prob. 5.1.2PCh. 5 - Prob. 5.2PCh. 5 - Prob. 5.3PCh. 5 - Prob. 5.4PCh. 5 - Prob. 5.5PCh. 5 - Prob. 5.6PCh. 5 - Prob. 5.7PCh. 5 - Prob. 5.8.1PCh. 5 - Prob. 5.8.2PCh. 5 - Prob. 5.9PCh. 5 - Prob. 5.10PCh. 5 - Prob. 5.14PCh. 5 - Prob. 5.2.1CCh. 5 - Prob. 5.2.2CCh. 5 - Prob. 5.3.1CCh. 5 - Prob. 5.3.2CCh. 5 - Prob. 5.3.3CCh. 5 - Prob. 5.3.4C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Preparing the [I] consolidation journal entries for sale of depreciable assets - Equity methodAssume that on January 1, 2011, a wholly owned subsidiary sells to its parent, for a sale price of $126,000, equipment that originally cost $148,000. The subsidiary originally purchased the equipment on January 1, 2007, and depreciated the equipment assuming a 10-year useful life (straight-line with no salvage value). The parent has adopted the subsidiary's depreciation policy and depreciates the equipment over the remaining useful life of 6 years. The parent uses the full equity method to account for its Equity Investment. a. Compute the annual depreciation expense for the subsidiary (pre-intercompany sale) and the parent (post-intercompany sale). Annual depreciation expense-subsidiary Answer Annual depreciation expense-parent Answer b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2011. $Answer c. Prepare the required [I] consolidation journal…arrow_forwardT1. Account Park Company acquires an 85% interest in Sunland Company on January 2, 2015. The resulting difference between book value and the value implied by the purchase price in the amount of $113,400 is entirely attributable to equipment with an original life of 15 years and a remaining useful life, on January 2, 2015, of 10 years. Prepare the December 31 consolidated financial statements workpaper entries for 2015 and 2016 to allocate and depreciate the difference between book value and the value implied by the purchase price, recording accumulated depreciation as a separate balance. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 2015 2016 Click if you would like to Show Work for this question:arrow_forwardOn January 1, 2015 P company acquired 80% interest in S Company for P2,000,000 cash. The stockholders' equity of S at the time of acquisition is P 1,875,000. On January 1, 2015, NCI is measured at its implied fair value. The excess of cost over book value of interest acquired is allocated to the following assets: Inventories: 100,000 (sold in 2013) Building: 200,000 (5-year remaining life) During 2015, S company reported total comprehensive income of 500,000 and paid dividends of P 100,000. What is the consolidated total comprehensive income attributable to parent on December 31, 2015, if P's net income for 2015 is 600,000? A. 860,000 B. 888,000 C. 808,000 D. 948,000arrow_forward
- On January 1, 2015 P company acquired 80% interest in S Company for P2,000,000 cash. The stockholders' equity of S at the time of acquisition is P 1,875,000. On January 1, 2015, NCI is measured at its implied fair value. The excess of cost over book value of interest acquired is allocated to the following assets: Inventories: 100,000 (sold in 2013) Building: 200,000 (5-year remaining life) During 2015, S company reported total comprehensive income of 500,000 and paid dividends of P 100,000. How much goodwill (gain on bargain purchase) is reported in the consolidated statement of financial position on January 1, 2015? A. 325,000 B. 200,000 C. (325,000) D. (375,000)arrow_forward5-On January 2, 2018, Moving Motors, Inc. acquired Bourland Enterprises as a wholly-owned subsidiary, paying an excess of $800,000 over the book value of Bourland's net assets. Part of the excess was attributable to a building with a 7-year life undervalued by $350,000. The rest was goodwill. The parent uses the equity method of pre-consolidation Equity investment bookkeeping. The 2020 financial statements for the two companies are presented below. Moving Motors, Inc. Bourland Enterprises Sales revenue $1,875,000 $781,000 Cost of goods sold -658,000 -451,000 Gross profit 1,217,000 330,000 Operating expenses -325,000 -129,000 Equity income 151,000 0 Net Income $1,043,000 $201,000 Retained Earnings, 1/1/20 $2,307,000 $475,500 Net income 1,043,000 201,000 Dividends -75,000 -23,400 Retained Earnings, 12/31/20 $3,275,000 $653,100 Cash and receivables $491,240…arrow_forward(Change from Fair Value to Equity Method) On January 3, 2016, Martin Company purchased for $500,000 cash a 10% interest in Renner Corp. On that date, the net assets of Renner had a book value of $3,700,000. The excess of cost over the underlying equity in net assets is attributable to undervalued depreciable assets having a remaining life of 10 years from the date of Martin’s purchase.The fair value of Martin’s investment in Renner securities is as follows: December 31, 2016, $560,000, and December 31, 2017, $515,000.On January 2, 2018, Martin purchased an additional 30% of Renner’s stock for $1,545,000 cash when the book value of Renner’s net assets was $4,150,000. The excess was attributable to depreciable assets having a remaining life of 8 years.During 2016, 2017, and 2018, the following occurred. Renner Net Income Dividends Paid by Renner to Martin 2016 $350,000 $15,000 2017 450,000 20,000 2018 550,000 70,000 InstructionsOn the books of Martin Company, prepare all…arrow_forward
- On January 1, 2014, Pilar Company acquired 60% interest in Santos Company for P2,400,000 cash. The stockholder’s equity of Santos at the time of acquisition is P3,400,000. Non-controlling interest is measured at its fair value. The excess of cost over the book value of interest acquired is allocated to the following assets: Inventories – P100,000 (sold in 2014) and Building – P200,000 (5-year remaining life). During 2014, Santos Company reported net income of P800,000 and paid dividends of P100,000. What is the amount of the non-controlling interest on January 1, 2014? A. P1,360,000 B. P1,600,000 C. P1,480,000 D. P960,000arrow_forwardOn January 1, 2018, Meredith Co. acquired 70% of Alex Co. at book value. On December 31, 2018, Alex sold a machine to Meredith for $11,250. The machine on Alex Co.;s books has a book value of $7,500. Meredith will use a 10-year life, no salvage value, and straight line depreciation. For 2019, Alex has a net income of $13,750. How much is the non-controlling interest in net income of subsidiary?arrow_forwardAssume an upstream sale of machinery occurs on January 1, 2014. The parent owns 70% of the subsidiary. There is a gain on the intercompany transfer and the machine has five remaining years of useful life and no salvage value. Straight-line depreciation is used. Which of the following statements is correct? A. Noncontrolling interest share for 2014 is equal to: (subsidiary income for 2014 minus the gain on sale) multiplied by 30%. B. Noncontrolling interest share for 2014 is equal to: subsidiary income for 2014 multiplied by 30%. C. Noncontrolling interest share for 2014 is equal to: (subsidiary income for 2014 minus the gain on sale plus the excess depreciation expense) multiplied by 30%. D. Noncontrolling interest share for 2014 is equal to: (subsidiary income for 2014 plus the excess depreciation expense) multiplied by 30%.arrow_forward
- Choose the correct.On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc., for $540,000 cash. The acquisition-date fair value of the noncontrolling interest was $60,000. At January 1, 2016, Star’s net assets had a total carrying amount of $420,000. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $80,000. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $70,000 in 2016 and $80,000 in 2017. Each year since the acquisition, Star has declared a $20,000 dividend. At January 1, 2018, Pride’s retained earnings show a $250,000 balance.Selected account balances for the two companies from their separate operations were as follows: Pride Star2018 Revenues. . . $498,000 $285,0002018 Expenses. . . 350,000 195,000Assuming that…arrow_forwardChoose the correct.On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc., for $540,000 cash. The acquisition-date fair value of the noncontrolling interest was $60,000. At January 1, 2016, Star’s net assets had a total carrying amount of $420,000. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $80,000. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $70,000 in 2016 and $80,000 in 2017. Each year since the acquisition, Star has declared a $20,000 dividend. At January 1, 2018, Pride’s retained earnings show a $250,000 balance.Selected account balances for the two companies from their separate operations were as follows: Pride Star2018 Revenues. . . $498,000 $285,0002018 Expenses. . . 350,000 195,000 What is…arrow_forwardParker Company acquires an 80% interest in Sargent Company for $300,000 on January 1, 2015, when Sargent Company has the following balance sheet: (See image) The excess of the price paid over book value is attributable to the fixed assets, which have afair value of $250,000, and to goodwill. The fixed assets have a 10-year remaining life. Parkeruses the sophisticated equity method to record the investment in Sargent Company. The trial balances of Parker and Sargent companies for December 31, 2016, are presented as follows: (see image) Parker Company continues to use the sophisticated equity method. Required:1. Prepare all the eliminations and adjustments that would be made on the 2016 consolidatedworksheet.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningFinancial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning