Concept explainers
Consolidated financial statements:Financial statements of both parent and subsidiary are combined to prepare a single set of books. The consolidation process starts with the data recorded on the books of individual consolidating companies. The accounting book of individual companies are placed in a third party work sheet, and entries are made eliminating intercompany transactions between them.
Consolidated
A consolidated balance sheet presents assets and liabilities of parent and subsidiary company on as single document, with no distinctions on which item belong to which company.
Requirement 1
Preparation of consolidated balance sheet worksheet as on 31 December 20X6.
b
Consolidated financial statements:Financial statements of both parent and subsidiary are combined to prepare a single set of books. The consolidation process starts with the data recorded on the books of individual consolidating companies. The accounting book of individual companies are placed in a third party work sheet, and entries are made eliminating intercompany transactions between them.
Consolidated balance sheet:
A consolidated balance sheet presents assets and liabilities of parent and subsidiary company on as single document, with no distinctions on which item belong to which company.
Requirement 2
Preparation of consolidated balance sheet of L and Subsidiary company.
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Advanced Financial Accounting
- On January 2, year 1, ABC Company purchased 75% of XYZ's outstanding common stock. On that date, the fair value of the 25% noncontrolling interest was $35,000. During year 1, XYZ had net income of $20,000. Selected balance sheet data at December 31, year 1, is as follows: ABC (Column 1), XYZ (Column 2) In ABC's December 31, year 1, consolidated balance sheet, what amount should be reported as noncontrolling interest in net assets?arrow_forwardPizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $148,000. On that date, the fair value of the noncontrolling interest was $37,000, and Slice reported retained earnings of $45,000 and had $93,000 of common stock outstanding. Pizza has used the equity method in accounting for its investment in Slice. Trial balance data for the two companies on December 31, 20X5, are as follows: PizzaCorporation SliceProducts Company Item Debit Credit Debit Credit Cash & Receivables $ 86,000 $ 80,000 Inventory 270,000 94,000 Land 83,000 83,000 Buildings & Equipment 501,000 154,000 Investment in Slice Products Company 176,400 Cost of Goods Sold 115,000 45,000 Depreciation Expense 25,000 15,000 Inventory Losses 15,000 6,000 Dividends Declared 45,000…arrow_forwardPizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $148,000. On that date, the fair value of the noncontrolling interest was $37,000, and Slice reported retained earnings of $45,000 and had $93,000 of common stock outstanding. Pizza has used the equity method in accounting for its investment in Slice. Trial balance data for the two companies on December 31, 20X5, are as follows: PizzaCorporation SliceProducts Company Item Debit Credit Debit Credit Cash & Receivables $ 86,000 $ 80,000 Inventory 270,000 94,000 Land 83,000 83,000 Buildings & Equipment 501,000 154,000 Investment in Slice Products Company 176,400 Cost of Goods Sold 115,000 45,000 Depreciation Expense 25,000 15,000 Inventory Losses 15,000 6,000 Dividends Declared 45,000…arrow_forward
- Pizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $148,000. On that date, the fair value of the noncontrolling interest was $37,000, and Slice reported retained earnings of $45,000 and had $93,000 of common stock outstanding. Pizza has used the equity method in accounting for its investment in Slice. Trial balance data for the two companies on December 31, 20X5, are as follows: PizzaCorporation SliceProducts Company Item Debit Credit Debit Credit Cash & Receivables $ 86,000 $ 80,000 Inventory 270,000 94,000 Land 83,000 83,000 Buildings & Equipment 501,000 154,000 Investment in Slice Products Company 176,400 Cost of Goods Sold 115,000 45,000 Depreciation Expense 25,000 15,000 Inventory Losses 15,000 6,000 Dividends Declared 45,000…arrow_forwardPizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $148,000. On that date, the fair value of the noncontrolling interest was $37,000, and Slice reported retained earnings of $45,000 and had $93,000 of common stock outstanding. Pizza has used the equity method in accounting for its investment in Slice. Trial balance data for the two companies on December 31, 20X5, are as follows: PizzaCorporation SliceProducts Company Item Debit Credit Debit Credit Cash & Receivables $ 86,000 $ 80,000 Inventory 270,000 94,000 Land 83,000 83,000 Buildings & Equipment 501,000 154,000 Investment in Slice Products Company 176,400 Cost of Goods Sold 115,000 45,000 Depreciation Expense 25,000 15,000 Inventory Losses 15,000 6,000 Dividends Declared 45,000…arrow_forwardPizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $148,000. On that date, the fair value of the noncontrolling interest was $37,000, and Slice reported retained earnings of $45,000 and had $93,000 of common stock outstanding. Pizza has used the equity method in accounting for its investment in Slice. Trial balance data for the two companies on December 31, 20X5, are as follows: PizzaCorporation SliceProducts Company Item Debit Credit Debit Credit Cash & Receivables $ 86,000 $ 80,000 Inventory 270,000 94,000 Land 83,000 83,000 Buildings & Equipment 501,000 154,000 Investment in Slice Products Company 176,400 Cost of Goods Sold 115,000 45,000 Depreciation Expense 25,000 15,000 Inventory Losses 15,000 6,000 Dividends Declared 45,000…arrow_forward
- Pizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $148,000. On that date, the fair value of the noncontrolling interest was $37,000, and Slice reported retained earnings of $45,000 and had $93,000 of common stock outstanding. Pizza has used the equity method in accounting for its investment in Slice. Trial balance data for the two companies on December 31, 20X5, are as follows: PizzaCorporation SliceProducts Company Item Debit Credit Debit Credit Cash & Receivables $ 86,000 $ 80,000 Inventory 270,000 94,000 Land 83,000 83,000 Buildings & Equipment 501,000 154,000 Investment in Slice Products Company 176,400 Cost of Goods Sold 115,000 45,000 Depreciation Expense 25,000 15,000 Inventory Losses 15,000 6,000 Dividends Declared 45,000…arrow_forwardPizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $148,000. On that date, the fair value of the noncontrolling interest was $37,000, and Slice reported retained earnings of $45,000 and had $93,000 of common stock outstanding. Pizza has used the equity method in accounting for its investment in Slice. Trial balance data for the two companies on December 31, 20X5, are as follows: PizzaCorporation SliceProducts Company Item Debit Credit Debit Credit Cash & Receivables $ 86,000 $ 80,000 Inventory 270,000 94,000 Land 83,000 83,000 Buildings & Equipment 501,000 154,000 Investment in Slice Products Company 176,400 Cost of Goods Sold 115,000 45,000 Depreciation Expense 25,000 15,000 Inventory Losses 15,000 6,000 Dividends Declared 45,000…arrow_forwardX Company purchased a (100%) controlling interest in Y Company by issuing $2,000,000 worth of common shares. The business combination agreement has an earnout clause that states the following: X Company would pay 10% of any earnings in excess of $750,000 to Y's shareholders in the first year following the acquisition. On acquisition date, X's shares had a market value of $80 per share.Required:a) Assuming that Y's net income in the first year following the acquisition was $950,000, prepare any journal entries (for X Company) that are necessary to reflect Y's results under IFRS 3 Business Combinations.b) Assuming that the agreement called for Y's shareholders to be compensated with 1,250 shares for any decline in X's share price, what journal entries would be required under IFRS 3, if the market value of X's shares dropped to $64 within the year?arrow_forward
- Compute for the consolidated expenses to be reported for the year. On January 1, ABC Acquired 60 percent of the outstanding voting stock of XYZ for P301,500 cash consideration. The remaining 40 percent of XYZ had an acquisition date fair value of P138,500. On January 1, XYZ possessed equipment (5-year life) that was undervalued on its books P25,000.XYZ also had developed several secret formulas that ABC assessed at P50,000. Theses formulas, although not recorded on XYZ's financial records, were estimated to have a 20-year future life. ABC also determined that the inventory of XYZ is overvalued by P10,000. 80% of these inventories remain unsold by the end of the year. As of December 31, the financial statements appeared as follows:arrow_forwardLivermore Corporation acquired 90 percent of Tiger Corporation's voting stock on January 1,20X2, for $450,000. The fair value of the noncontrolling interest was $50,000 at the date of acquisition. Tiger reported common stock outstanding of $100,000 and retained earnings of $280,000. The differential is assigned to buildings with an expected life of 15 years at the date of acquisition. On December 31,20X4, Livermore had $30,000 of unrealized profits on its books from inventory sales to Tiger, and Tiger had $40,000 of unrealized profit on its books from inventory sales to Livermore. All inventory held at December 31, 20X4, was sold during 20 x5. On December 31,20 X5, Livermore had $18,000 of unrealized profit on its books from inventory sales to Tiger, and Tiger had unrealized profit on its books of 45,000 from inventory sales to Livermore. In 20x5 Tiger reported net income of $225,000. The amount Livermore will report as income from Tiger Company for year 20x5would bearrow_forwardPaste Corporation acquired 70 percent of Stick Company's stock on January 1, 20X9, for $105,000. At that date, the fair value of the noncontrolling interest was equal to 30 percent of the book value of Stick Company. The companies reported the following stockholders’ equity balances immediately after the acquisition: Paste Corporation Stick Company Common Stock $ 120,000 $ 30,000 Additional Paid-in Capital 230,000 80,000 Retained Earnings 290,000 40,000 Total $ 640,000 $ 150,000 Paste and Stick reported 20X9 operating incomes of $90,000 and $35,000 and dividend payments of $30,000 and $10,000, respectively. Required: Compute the amount reported as net income by each company for 20X9, assuming Paste uses equity-method accounting for its investment in Stick. Compute consolidated net income for 20X9.arrow_forward
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