ADVANCED ACCOUNTING
13th Edition
ISBN: 9781260773033
Author: Hoyle
Publisher: MCG
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Chapter 6, Problem 5P
To determine
Identify the appropriate answer for the given statement from the given choices.
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The parent company acquires all of a subsidiary’s common stock but only 70 percent of its preferred shares. This preferred stock pays a 7 percent annual cumulative dividend. No dividends are in arrears at the current time. How is the noncontrolling interest’s share of the subsidiary’s income computed?a. As 30 percent of the subsidiary’s preferred dividend.b. No allocation is made because the dividends have been paid.c. As 30 percent of the subsidiary’s income after all dividends have been subtracted.d. Income is assigned to the preferred stock based on total par value and 30 percent of that amount is allocated to the noncontrolling interest.
parent acquires all of a subsidiary’s common stock and 60 percent of its preferred stock. The preferred stock has a cumulative dividend. No dividends are in arrears. How is the noncontrolling interest in the subsidiary’s net income assigned?
Multiple Choice
The noncontrolling interest in consolidated net income is assigned as 40 percent of the value of the preferred stock, based on an allocation between common stock and preferred stock.
There is no allocation to the noncontrolling interest because the parent owns 100% of the common stock and net income belongs to the controlling interest.
The noncontrolling interest in consolidated net income is assigned as 40 percent of the preferred stock dividends.
The noncontrolling interest in consolidated net income is assigned as 40 percent of the subsidiary’s income after subtracting preferred stock dividends.
The noncontrolling interest in consolidated net income is assigned as 40 percent of the subsidiary’s income before preferred stock…
1. On January 1, 20x1, Entity A acquires 30% interest in Entity B
d. Entity A should not apply the equity method.
amount of the investment in associate on December 31, 20x2?
interest in Entity B. Entity B reports profit of 94M for the
amount of the investment in associate on December 31, 20x1?
dividends of P50,000 in 20x1. How much is the carrying
P200,000 and declares no dividends. What is the carrying
2. Entity A uses the equity method in accounting for its 20%
period. Entity B has outstanding 5% cumulative preference
for P600,000. Entity B reports profit of P200,000 and declares
of P300,000 at year-end. In 20x2, Entity B reports loss of
PAS 28
319
ned to exist
a. 550,000
b. 590,000
c. 600,000
d. 640,000
vestee.
vestee.
avestee.
stee's board
c. 645,000
Under this
ce is initially
600,000
a.
d. 630,000
b. 660,000
ement
e investor's
nges in
chares with an aggregate par value of P10M. Entity A holds
none of the preference shares. Entity B did not declare
dividends on the preference…
Chapter 6 Solutions
ADVANCED ACCOUNTING
Ch. 6 - Prob. 1QCh. 6 - Prob. 2QCh. 6 - When is a firm required to consolidate the...Ch. 6 - Prob. 4QCh. 6 - Prob. 5QCh. 6 - Prob. 6QCh. 6 - Prob. 7QCh. 6 - Prob. 8QCh. 6 - Prob. 9QCh. 6 - Prob. 10Q
Ch. 6 - Prob. 11QCh. 6 - How do noncontrolling interest balances affect the...Ch. 6 - Prob. 13QCh. 6 - Prob. 14QCh. 6 - Prob. 15QCh. 6 - Prob. 16QCh. 6 - Prob. 17QCh. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Problems 7 and 8 are based on the following...Ch. 6 - Prob. 8PCh. 6 - Bens man Corporation is computing EPS. One of its...Ch. 6 - Prob. 10PCh. 6 - Prob. 11PCh. 6 - Prob. 12PCh. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - On January 1, Coldwater Company has a net book...Ch. 6 - Prob. 18PCh. 6 - Prob. 19PCh. 6 - Prob. 20PCh. 6 - On January 1, 2018, Stamford issues 10,000...Ch. 6 - On January 1, 2018, Stamford reacquires 8,000 of...Ch. 6 - Prob. 23PCh. 6 - Prob. 24PCh. 6 - On December 31, 2017. PanTech Company invests...Ch. 6 - Prob. 26PCh. 6 - Prob. 27PCh. 6 - Prob. 28PCh. 6 - Prob. 29PCh. 6 - Prob. 30PCh. 6 - Prob. 31PCh. 6 - Prob. 32PCh. 6 - Prob. 33PCh. 6 - Prob. 34PCh. 6 - Prob. 35PCh. 6 - Alford Company and its 80 percentowned subsidiary,...Ch. 6 - Prob. 37PCh. 6 - Prob. 38PCh. 6 - Prob. 39PCh. 6 - Prob. 40PCh. 6 - Prob. 41PCh. 6 - Prob. 42PCh. 6 - Prob. 43PCh. 6 - Prob. 44PCh. 6 - Fred, Inc., and Herman Corporation formed a...Ch. 6 - Prob. 46PCh. 6 - Prob. 47PCh. 6 - Prob. 48PCh. 6 - Prob. 49PCh. 6 - Prob. 50PCh. 6 - Prob. 1DYSCh. 6 - Prob. 2DYSCh. 6 - The FASB ASC Subtopic Variable Interest Entities...
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Similar questions
- A 70% owned subsidiary company declares and pays a cash dividend. What effect does the dividend have on the retained earnings and minority interest balances in the parent company’s consolidated balance sheet? a. No effect on either retained earnings or minority interest b. Decrease in both retained earnings and minority interest c. A decrease in retained earnings and no effect on minority interest. d. No effect on retained earnings and a decrease in minority interest.arrow_forwardA wholly owned subsidiary declared dividend and half remains unpaid bythe end of the year, which of the following is TRUE? a. Only half of the amount of the dividend will be used to reduce the profit ofthe parent for consolidation purposes. b. The total amount of the dividend will be eliminated in the working paperelimination entry by debiting “dividend revenue” account.c. The transaction will have an impact in the computation of the balance ofNCI at the end.d. The elimination entry will include a debit to non-controlling interest for theamount of dividend received by the non-controlling shareholders.arrow_forwardQ. No. 3 - X Ltd. owns all of the shares of Y Ltd. The shares of Y have an adjusted cost base of $40,000 and a fair market value of $940,000. Y has retained earnings of $100,000 (earned after 1971) and no eligible or non-eligible refundable dividend tax on hand. Y plans to pay a dividend of $900,000 to X. Subsequently, X will sell the shares of Y Ltd. to an arm's-length person for $40,000. Determine the tax consequences to X Ltd. of these transactions.arrow_forward
- A subsidiary that is 75% owned by its parent company pays a dividend of R100 00. Onconsolidation the amount to be eliminated: Select one: A. none of the above B. R100 000C. R25 000 D. 75 000arrow_forward1. On January 1, 20X1, P Company (PC) purchased 80% of the outstanding shares of S Company (SC) at the cost of P700,000. On that date, SC had P300,000 and P500,000 capital stock and retained earnings, The non-controlling interest (NCI) is measured on a fair-value basis. For 20X1, PC had a comprehensive income (CI) of P300,000 and paid dividends of P100,000. On the other hand, SC reported a CI of P150,000 and paid dividends of P50,000. All of the assets and liabilities of S Company had book values that approximately equal to their respective market values. On December 31, 20X1, PC sold a piece of equipment with a book value of P30,000 to SC for P25,000. The gain on the sale is included in the CI of PC indicated above. The equipment has a 10-year useful life. It has been used for the past five (5) years before the date of acquisition. Required: Prepare the journal entries that both companies should make for the year Allocate the consolidated comprehensive income at the end of the…arrow_forwardTRUE OR FALSE: Indicate whether the statements are true or false. 1. Assuming the parent acquired 100 percent of the subsidiary’s stock and there are no purchase differentials, the investment income recorded by the parent in the current period will equal the subsidiary’s current net income recognized subsequent to the acquisition date. 2.arrow_forward
- PROBLEM IV. On January 2, 2019, Klaus Company (qualified as SME) acquired 80% interest in Marcel Company for P4,125,000 cash. On this date, the outstanding ordinary share capital and accumulated profits of Klaus Company and Marcel Company are as follows: Klaus Marcel Ordinary share capital P 2,250,000 P 1,312,000 Share premium 1,750,000 Accumulated profits (losses) 5,520,000 3,187,500 There was no issuance of ordinary shares during the year. Fair value of the following assets of Marcel exceeded their book values as follows: Inventories, P210,000; Property and equipment (useful life, 10 years), P127,500. All other assets and liabilities are fairly valued. On December 31, 2019, the two companies reported the following operating results: Klaus Marcel Net income P 1,825,000 P 975,000 Dividends paid 525,000 262,500 1. Consolidated shareholders' equity reported in the consolidated statement of financial position on 12/31/19arrow_forward3. Set out below are the draft income statements of P and its subsidiary S for the year ended 31 December 20X7. On the 1 January 20X6 P purchased 75% of the ordinary shares in S. Revenue Cost of sales and expenses Gross profit Operating expenses Profit from operations Finance costs Profit before taxation Tax Profit for the year P $000 300 (180) 120 (47) 73 73 (25) 48 S $000 150 (70) 80 P values non-controlling interest using the fair value method. (23) 57 (2) 55 (16) 39 During the year S sold goods to P for $20,000, making a mark up of one third. Only 20% of these goods were sold before the end of the year, the rest were still in inventory. Prepare the consolidated income statement for the year ended 31 December 20X7arrow_forwardWhich of the following is a correct statement pertaining to consolidation of a subsidiary with preferred shares? O a. When preferred shares are cumulative, the preferred shareholders are only entitled to income equal to the yearly dividend, if the company has not suffered a loss for the year. O b. If the preferred shares are cumulative, the current year's net income would be allocated to the preferred shares only if dividends are declared in the year. O c. If the preferred shares are non-cumulative, the current year's net income would only be allocated to preferred shares if preferred dividends are declared. O d. If the preferred shares are non-cumulative, the current year's net income would be allocated to the preferred shares whether or not preferred dividends are declareD.arrow_forward
- 1 On January 1, Belleville Company paid $1,710,000 to acquire 57,000 shares of O'Fallon's voting common stock, which represents a 40 percent investment. No allocations to goodwill or other specific accounts were made. Significant influence over O'Fallon is achieved by this acquisition, and so Belleville applies the equity method. O'Fallon declared a $3 per share dividend during the year and reported net income of $590,000. What is the balance in the Investment in O'Fallon account found in Belleville's financial records as of December 31? Skipped References Multiple Choice O $1,946,000. $1,775,000. $1,895,000. $1,835,000.arrow_forwardOn 1 July 2020 Harry Ltd purchased 70 per cent of the issued share capital of Wills Ltd and has control of Wills. The fair value of the net assets of Wills Ltd on that date was represented as follows: Share Capital $1,800,000 Retained 400,000 2,200,000 Harry Ltd paid cash consideration of $2,000,000 for Wills. Wills Ltd made an operating profit of $450,000, there were no intragroup transactions during the period ended 30 June 2021. Goodwill had been determined to have been impaired during the year by $45,000. What consolidation journal entries are required for the period and what is the non-controlling interest in equity as at 30 June 2021?arrow_forwardA partially owned subsidiary declared dividend and half remains unpaid by the end of the year, which of the following is CORRECT? A. The total amount of the dividend will be eliminated in the working paper elimination entry by debiting “dividend” account. B. Half of the amount of the dividend will be used to reduce the profit of the parent for consolidation purposes. C. The elimination entry will include a debit to non-controlling interest for the amount of dividend received by the non-controlling shareholders. D. The transaction will increase the balance of NCI at the end.arrow_forward
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