Concept explainers
Consolidation entry: the basic consolidation entry removes the investment in parent company stock account and subsidiary’s
Which of the given companies S or P is parent company.
Consolidation entry: the basic consolidation entry removes the investment in parent company stock account and subsidiary’s stockholders equity accounts. Consolidation is the process of combining the financials of subsidiary with financials of parent company. This is typically done when parent holds more than 50 percent of shares of another entity.
Percentage of owner ship parent P holds in subsidiary S.
Consolidation entry: the basic consolidation entry removes the investment in parent company stock account and subsidiary’s stockholders equity accounts. Consolidation is the process of combining the financials of subsidiary with financials of parent company. This is typically done when parent holds more than 50 percent of shares of another entity.
Amount to be reported without consolidating entry when net income for 20X7 is $70,000.
a. Will income to non-controlling interest increase or decrease
Consolidation entry: the basic consolidation entry removes the investment in parent company stock account and subsidiary’s stockholders equity accounts. Consolidation is the process of combining the financials of subsidiary with financials of parent company. This is typically done when parent holds more than 50 percent of shares of another entity.
Increase or decrease in income to the non-controlling interest reported in 20X7 as a result of preceding consolidating entry
b. Elimination entry for consolidation worksheet
Consolidation entry: the basic consolidation entry removes the investment in parent company stock account and subsidiary’s stockholders equity accounts. Consolidation is the process of combining the financials of subsidiary with financials of parent company. This is typically done when parent holds more than 50 percent of shares of another entity.
Requirement 4
Preparation of elimination entry for consolidation worksheet on December 31 20X8.
Want to see the full answer?
Check out a sample textbook solutionChapter 8 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
- Suspect Company Issued $600,000 of 9 percent first mortgage bonds on January 1, 20X1, at 103. The bonds mature in 20 years and pay Interest semiannually on January 1 and July 1. Prime Corporation purchased $400,000 of Suspect's bonds from the original purchaser on December 31, 20X5, for $397,000. Prime owns 60 percent of Suspect's voting common stock. Required: a. Prepare the worksheet consolidation entry or entries needed to remove the effects of the Intercorporate bond ownership In preparing consolidated financial statements for 20X5. (If no entry is required for a transaction/event, select "No Journal entry required" In the first account fleld. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.) No A B No A Event 1 B 2 Event 1 2 Bonds payable Premium on bonds payable Investment in Suspect Company bonds Gain on bond retirement Interest payable Answer is complete but not entirely correct. Accounts Interest receivable b. Prepare the worksheet…arrow_forwardSuspect Company Issued $720,000 of 8 percent first mortgage bonds on January 1, 20X1, at 105. The bonds mature in 20 years and pay interest semiannually on January 1 and July 1. Prime Corporation purchased $480,000 of Suspect's bonds from the original purchaser on January 1, 20X5, for $473,000. Prime owns 60 percent of Suspect's voting common stock. Required: a. Prepare the worksheet consolidation entry or entries needed to remove the effects of the Intercorporate bond ownership In preparing consolidated financial statements for 20X5. b. Prepare the worksheet consolidation entry or entries needed to remove the effects of the Intercorporate bond ownership In preparing consolidated financial statements for 20X6. Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements…arrow_forwardConsolidation adjustment necessary when affiliate's debt is acquired from non-affiliate Assume that a Parent company owns 65 percent of its Subsidiary. The parent company uses the equity method to account for its Equity investment. On January 1, 2015, the Parent (face) 10 year, 10 percent bonds payable for a $100,000 premium. The bonds pay interest on December 31 of each year. On January 1, 2018, amortization. In preparing the consolidated financial statements for the year ended December 31, 2019, what consolidating entry adjustment is necessary the Subsidiary $0 + Please answer all parts of the question. $2,000,000 use straight-line company issued to an unaffiliated company acquired 30 percent of the bonds for $572,000. Both companies for the beginning-of-year Equity investment balance?arrow_forward
- Complete the following partial worksheet for Pat Inc. and Slinger Company for the year acquisition of intercompany bonds 2013. Pat In. and Subsidiary Slinger Company Partial Consolidated Worksheet For Year Ended December 31, 2013 Trial Balance Eliminations and Adjustments Pat Slinger Dr Cr. Interest receivable 8,000 Investment in Slinger bonds 100,898 Interest payable (8,000) Bonds payable (100,000) Premium on bonds payable (448) Interest income* Interest expense* *To be entered Eliminations and Adjustments: (B1) Eliminate the intercompany bonds and the applicable interest and revenue and expense. Record the gain or loss on retirement. (B2) Eliminate the intercompany interest payable…arrow_forwardConsolidation adjustment necessary when affiliate's debt is acquired from non-affiliate Assume that a Parent company owns 65 percent of its Subsidiary. The parent company uses the equity method to account for its Equity investment. On January 1, 2015, the Parent company issued to an unaffiliated company $2,000,000 (face) 10 year, 10 percent bonds payable for a $100,000 premium. The bonds pay interest on December 31 of each year. On January 1, 2018, the Subsidiary acquired 30 percent of the bonds for $572,000. Both companies use straight-line amortization. In preparing the consolidated financial statements for the year ended December 31, 2019, what consolidating entry adjustment is necessary for the beginning-of-year Equity investment balance? $Answer Answer Creditarrow_forwardOn January 1, 20x1, ABC Co. acquired 10%, P1,000,000 bonds for P827,135. The bonds mature on December 31, 20x3 and pay annual interest every December 31. ABC Co. incurred transaction costs P80,000 on the acquisition. The effective interest rate adjusted for the effect of the transaction costs is 14%. The bonds are to be held under a "hold to collect and sell" business model. Information on fair values is as follows: December 31, 20x1...............98 December 31, 20x2..............102 December 31, 20x3..............100 9.How much is the carrying amount of the investment on December 31, 20x1? a. 935,134 b. 1,002,000 c. 980,000 d. 965,443 10. How much is the unrealized gain (loss) recognized in other comprehensive income on December 31, 20x1? a. 45,866 b. (45,866) c. (37,899) d. 0 11. How much is the interest income recognized in 20x2? a. 126,999 c. 135,088 b. 130,779 d. 144,388arrow_forward
- On 12/31/2020, a parent company purchased the bonds of its subsidiary from the bondholders of the subsidiary for $102,000 cash. The carrying value of the bonds on the general ledger of the subsidiary was $107,000. What amounts will appear on the parent's consolidated balance sheet for 2020? Investment Bonds A) In Bonds Payable $0 $0 Investment Bonds B) In Bonds Payable $102,000 $0 Investment Bonds In Bonds Payable $107,000 $102,000 Investment Bonds D) In Bonds Payable $102,000 $107,000 Investment Bonds E) In Bonds Payable $0 $107,000arrow_forwardIn business combination, the fair value of combinee bonds payable was $ 120,000 and the carrying amount of bonds payable was $ 100,000. The journal entry to allocate liquidated company to identifiable assets and liabilities with remainder to goodwill includes: а. Credit to premium on bonds payable $ 20,000. b. Debit to discount on bonds payable $ 20,000. C. Credit to bonds payable $ 120,000. d. Debit to premium on bonds payable $ 20,000arrow_forward42. Company S is a 100%-owned subsidiary of Company P. On January I, Company S had $100,000 face value of 8% bonds outstanding. The bonds had 5 years to maturity and an unamortized discount of $5,000 as of that date. On January I, Company P purchased the bonds for $99,000, The net adjustment to reduce consolidated net income for the year ended December 31 is a. $4,000 b. $3,200 c. $4,800 d. $5,000arrow_forward
- Powell Company owns an 80% interest in Sauter, Inc. On January 1, 20X1, Sauter issued $400,000 of 10-year, 12% bonds at a premium of $50,000. On December 31, 20X5, 5 years after original issuance, Powell purchased all of the outstanding bonds for $390,000. Both firms use the straight-line method of amortization. The interest adjustment in the 20X5 subsidiary income distribution schedule is ____. a. $2,000 b. $5,000 c. $4,500 d. $0arrow_forwardTransfer between Categories On December 31, 2018, Leslie Company held an investment in bonds of Kaufmann Company which it categorized as being held to maturity. At that time, the 8%, 100,000 face value bonds had a carrying value of 107,023.56 and were being amortized using the effective interest method based on a market rate of 7%. Interest on these bonds is paid annually each December 31. On December 31, 2019, after recording the interest earned, Leslie decided to reclassify the Kaufmann bonds to its available-for-sale category in anticipation of a major restructuring. At that time, the ending quoted market price for the bonds was 105,000. Required: Prepare the journal entries on December 31, 2019, to record the interest earned and the reclassification.arrow_forwardMidyear purchase of subsidiary’s bonds Sanur Corporation is a 90 percent subsidiary of Pare Corporation. On January 1, 2016, Sanur issued $1,000,000 par, 10 percent 5-year bonds with an unamortized premium of $50,000. On July 1, 2016, Pare Corporation purchased $400,000 par of the outstanding bonds of Sanur for $390,000. Straight-line amortization is used. REQUIRED: Calculate the following: 1. The gain or loss on constructive retirement of the bonds 2. The consolidated bond interest expense for 2016 3. The consolidated bond liability at December 31, 2016arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning