Subsidiary
During the preparation of consolidated financial statements, the amount of subsidiary shareholders’ equity accruing to preferred shareholders must be determined before dealing with elimination of the intercompany common stock ownership. If the parent holds some of the subsidiary preferred stock, its portion of stock interest is eliminated. Any portion of subsidiary preferred stock interest not held by parent is assigned to non-controlling interest.
The preparation of consolidation entries for consolidated balance sheet on January 1, 20X5.
Subsidiary preferred stock outstanding: many companies have more than one type of outstanding stock and each type of security serves a particular purpose. Subsidiary preferred shareholders have claim on the net assets of the subsidiary, and special attention must be given to that claim in the preparation of consolidated financial statements.
During the preparation of consolidated financial statements, the amount of subsidiary shareholders’ equity accruing to preferred shareholders must be determined before dealing with elimination of the intercompany common stock ownership. If the parent holds some of the subsidiary preferred stock, its portion of stock interest is eliminated. Any portion of subsidiary preferred stock interest not held by parent is assigned to non-controlling interest.
The computation of net income assigned to controlling shareholders when P reported income from separate operation as $80,00.0
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Advanced Financial Accounting
- Effective May 1, the shareholders of Baltimore Corporation approved a 2-for-1 split of the companys common stock and an increase in authorized common shares from 100,000 shares (par value 20 per share) to 200,000 shares (par value 10 per share). Baltimores shareholders equity items immediately before issuance of the stock split shares were as follows: What should be the balances in Baltimores Additional Paid-in Capital and Retained Earnings accounts immediately after the stock split is effected?arrow_forwardPeal Corportion issues 4,000 shares of its $10 par value stock with a market value of $85,000 to acquire 85 percent of the common stock of Seed Company on August 31, 20X3. Seed's fair value was determined to be $100,000 on that date. Peal had previously purchased 15% of Seed's common stock for $9,000 on January 31, 20X1, and had carried this investment at fair value on its balance. Peal reported this investment at $15,000 on its balance sheet at August 31, 20X3, immediately prior to acquiring the remaining 85 percent of Seed's shares. On August 31, 20X3, Peal also paid appraisal fees of $3,500 and stock issue costs of $2,000 incurred in completing the acquisition of the additional shares. Prepare the journal entries to be recorded by Peal in completing the acquisition of the additional shares. a) Record the acquisition of ownership in Seed Company by the issuance of shares. Record the payment of appraisal fee incurred in completing the acquisition of the additional shares. b) Record…arrow_forwardReden Corporation purchased 40 percent of Montgomery Company’s common stock on January 1, 20X9, at underlying book value of $262,400. Montgomery’s balance sheet contained the following stockholders’ equity balances: Preferred Stock ($4 par value, 42,000 shares issued and outstanding) $ 168,000 Common Stock ($1 par value, 145,000 shares issued and outstanding) 145,000 Additional Paid-In Capital 189,000 Retained Earnings 322,000 Total Stockholders’ Equity $ 824,000 Montgomery’s preferred stock is cumulative and pays a 5 percent annual dividend. Montgomery reported net income of $95,000 for 20X9 and paid total dividends of $46,000. Required: Give the journal entries recorded by Reden Corporation for 20X9 related to its investment in Montgomery Company common stock. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.arrow_forward
- Borner Communications’ articles of incorporation authorized the issuance of 130 million common shares. The transactions described below effected changes in Borner’s outstanding shares. Prior to the transactions, Borner’s shareholders’ equity included the following: Shareholders’ Equity ($ in millions) Common stock, 110 million shares at $1 par $ 110 Paid-in capital – excess of par 330 Retained earnings 300 Required:Assuming that Borner Communications retires shares it reacquires (restores their status to that of authorized but unissued shares), record the appropriate journal entry for each of the following transactions: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) On January 7, 2021, Borner reacquired 5 million shares at $5.00 per share. On August 23, 2021, Borner reacquired 7 million shares at $3.00 per share. On…arrow_forwardBorner Communications’ articles of incorporation authorized the issuance of 130 million common shares. The transactions described below effected changes in Borner’s outstanding shares. Prior to the transactions, Borner’s shareholders’ equity included the following: Shareholders’ Equity ($ in millions) Common stock, 100 million shares at $1 par $100 Paid-in capital—excess of par 300 Retained earnings 210 Required: Assuming that Borner Communications retires shares it reacquires (restores their status to that of authorized but unissued shares), record the appropriate journal entry for each of the following transactions: 1. On January 7, 2016, Borner reacquired 2 million shares at $5.00 per share. 2. On August 23, 2016, Borner reacquired 4 million shares at $3.50 per share. 3. On July 25, 2017, Borner sold 3 million common shares at $6 per share.arrow_forwardDewey Corporation owns 30 percent of the common stock of Jimm Company, which it purchased at underlying book value on January 1, 20X5. Dewey reported a balance of $245,000 for its investment in Jimm Company on January 1, 20X5, and $276,800 at December 31, 20X5. During 20X5, Dewey and Jimm Company reported operating income of $340,000 and $70,000, respectively. Jimm received dividends from investments in marketable equity securities in the amount of $7,000 during 20X5. It also reported an increase of $18,000 in its portfolio of securities that were carried; fair value, and a gain in the fair value of derivative contracts that were appropriately designated as cash flow hedges; hence this gain was reported in Other Comprehensive Income (OCI). Jimm paid dividends of $20,000 in 20X5. Ignore income taxes in determining your solution. Required: Assuming that Dewey uses the equity method in accounting for its investment in Jimm, compute the amount of income from Jimm recorded by Dewey in…arrow_forward
- Goodfellas obtained a 60% Bedfellow in the 100,000 $1 shares of Mist on 1 January 20X8, when the retained earnings of Mist were $850,000. Consideration comprised $250,000 cash, $400,000 payable on 1 January 20X9 and one share in Goodfellas for each two shares acquired. Goodfellas has a cost of capital of 8% and the market value of its shares on 1 January 20X8 was $2.30. Goodfellas measures non-controlling interest at fair value. The fair value of the non-controlling interest at 1 January 20X8 was estimated to be $400,000. What was the goodwill arising on acquisition Select one alternative: $169,000 $139,370 $119,370 $130,370arrow_forwardBorner Communications’ articles of incorporation authorized the issuance of 140 million common shares. The transactions described below effected changes in Borner’s outstanding shares. Prior to the transactions, Borner’s shareholders’ equity included the following: Shareholders’ Equity ($ in millions) Common stock, 125 million shares at $1 par $ 125 Paid-in capital – excess of par 375 Retained earnings 235 Assuming that Borner Communications retires shares it reacquires (restores their status to that of authorized but unissued shares), record the appropriate journal entry for each of the following transactions: On January 7, 2024, Borner reacquired 2 million shares at $7.50 per share. On August 23, 2024, Borner reacquired 4 million shares at $3.00 per share. On July 25, 2025, Borner sold 3 million common shares at $9 per sharearrow_forwardOn December 31, year 1, Saxe Corporation was acquired by Poe Corporation. In the business combination, Poe issued 200,000 shares of its $10 par common stock, with a market price of $18 a share, for all of Saxe’s common stock. The stockholders’ equity section of each company’s balance sheet immediately before the combination was Accounts Poe Saxe Common stock $3,000,000 $1,500,000 Additional paidin capital 1,300,000 150,000 Retained earnings 2,500,000 850,000 Total $6,800,000 $2,500,000 In the December 31, year 1 consolidated balance sheet, common stock should be reported atarrow_forward
- On December 31, year 1, Saxe Corporation was acquired by Poe Corporation. In the business combination, Poe issued 200,000 shares of its $10 par common stock, with a market price of $18 a share, for all of Saxe’s common stock. The stockholders’ equity section of each company’s balance sheet immediately before the combination was Accounts Poe Saxe Common stock $3,000,000 $1,500,000 Additional paidin capital 1,300,000 150,000 Retained earnings 2,500,000 850,000 Total $6,800,000 $2,500,000 In the December 31, year 1 consolidated balance sheet, additional paid in capital should be reported atarrow_forwardOn January 1, 20x1, ABC Company purchased 2,500 ordinary shares of DEF Company at ₱200 per share plustransaction costs of ₱5,250. These shares are acquired for trading purposes. On December 31, 20x1, theordinary shares of DEF Company are quoted at ₱244 per share.On February 2, 20x2, ABC Company sold 750 shares of the DEF Company ordinary shares at ₱250 per share.ABC Company incurred transaction costs amounting to ₱2,840 in relation to the sale. On December 31, 20x2,the ordinary shares of DEF Company are quoted at ₱247 per share. 1. At what amount shall ABC Company initially recognized its investment in DEF Company on January 1,20x1?2. At what amount shall ABC Company report its investment in DEF Company on December 31, 20x1?3. What amount of unrealized gain (loss) on fair value change shall be reported in profit or loss for 20x1?4. What amount of gain (loss) shall be recognized on February 2, 20x2?5. At what amount shall ABC Company report its investment in DEF Company on December 31,…arrow_forwardOn January 1, 20x1 Pinup Corp acquired 34,560 outstanding ordinary shares of Slug corp. for a cash consideration pf P5,158,400. The shareholder’s equity of Slug Corp. on the date of business combination is presented below: Ordinary shares P100 par value 5,760,000 Share premium 1,600,000 Retained Earnings 960,000 Pinup Corp agreed to issue additional 1,000 shares to former owners of Slug Corp if the market price per share of Pinup Corp shares increase to P120 pe share. On the acquisition date, the contingent consideration was estimated at P80,000. What is the amount of non-controlling interest if it is measured at its proportionate share in the identifiable net assets of Slug Corp? 3,328,000 3,492,267 4,992,000 3,200,000arrow_forward
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