Concept explainers
Sale of subsidiary common shares: When a parent sells subsidiary shares, a gain or loss normally occurs and is recorded on the seller’s books, which needed to be recognized in consolidated net income. Under ASE 810, changes in a parent’s ownership interest in a subsidiary while the parent retains control require an adjustment to the amount assigned to the non-controlling interest to reflect its change in ownership in the subsidiary. Any difference in fair value of the controlling interest results in an adjustment to the
A memo to present alternative ways to record the difference between the carrying value and sales price of the share that are sold and recommend preferred reporting alternative.
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Advanced Financial Accounting
- Ames Corporation repurchases 10,000 shares of its common stock for $12 per share. The shares were originally issued at an average price of $10 per share. Later it resells 6,000 of the shares for $15 per share and the remaining 4,000 shares for $17 per share. How much gain or loss should Ames report on its income statement as a result of these transactions? $38.000 gain $0 $20,000 loss $20,000 loss and $38,000 gainarrow_forward3 Parent Company owns 100% of ABC Company's 100,000 shares. ABC issues 25,000 new shares to the public for $1 cash per share and Parent Co. acquires none of the shares. The book value of ABC's net assets before the stock issuance was 310,000. AAP associated with the acquisition of ABC's net assets, updated for AAP amortization to the date of the stock issuance, was 220,000 prior to the stock issuance. What is the amount of the Parent's claim on the net assets of ABC Co. as of the date of the stock issuance?arrow_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_forward
- On 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. What amount of gain (loss) shall be recognized on February 2, 20x2?2. At what amount shall ABC Company report its investment in DEF Company on December 31, 20x2?3. What amount of unrealized gain (loss) on fair value change shall be reported in profit or loss for 20x2?4. What total amount shall be reported in profit or loss for the year 20x2 in relation to the DEF Companyordinary shares?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_forwardPrime Industries acquired an 80 percent interest in Sands Company by purchasing 24,000 of its 30,000 outstanding shares of common stock at book value of P105,000 on January 1, 20x4. Sands reported net income in 20x4 of P45,000 and in 20x5 of P60,000 earned evenly throughout the respective years. Prime received P12,000 dividends from Sands in 20x4 and P18,000 in 20x5. Prime uses the equity method to record its investment. The balance of Prime’s Investment in Sands account at December 31, 20x5 is: P105,000 P138,600 P159,000 P165,000arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning