Concept explainers
Multilevel ownership and control:If a company establish multiple corporate levels through which they carryout diversified operations, i.e., a company may have a number of subsidiaries one of which is a retailer. When consolidated statements are prepared, they include companies in which the parent has only indirect investment along with direct ownership. The complexity of consolidation process increases as additional ownership levels are included. The amount of income and net assets assigned to controlling and non-controlling interest, and unrealized
The consolidated net income reported by P for 20X6.
Multilevel ownership and control:If a company establish multiple corporate levels through which they carryout diversified operations, i.e. a company may have a number of subsidiaries one of which is a retailer. When consolidated statements are prepared, they include companies in which the parent has only indirect investment along with direct ownership. The complexity of consolidation process increases as additional ownership levels are included. The amount of income and net assets assigned to controlling and non-controlling interest, and unrealized profit and losses to be eliminated, must be determined at each level of ownership.
The amount of income assigned to non-controlling interest in 20X6.
Multilevel ownership and control:If a company establish multiple corporate levels through which they carryout diversified operations, i.e. a company may have a number of subsidiaries one of which is a retailer. When consolidated statements are prepared, they include companies in which the parent has only indirect investment along with direct ownership. The complexity of consolidation process increases as additional ownership levels are included. The amount of income and net assets assigned to controlling and non-controlling interest, and unrealized profit and losses to be eliminated, must be determined at each level of ownership.
The income assigned to controlling interest for 20X6.
Multilevel ownership and control:If a company establish multiple corporate levels through which they carryout diversified operations, i.e. a company may have a number of subsidiaries one of which is a retailer. When consolidated statements are prepared, they include companies in which the parent has only indirect investment along with direct ownership. The complexity of consolidation process increases as additional ownership levels are included. The amount of income and net assets assigned to controlling and non-controlling interest, and unrealized profit and losses to be eliminated, must be determined at each level of ownership.
The amount to be reported as dividends declared by P in consolidated
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Chapter 9 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
- Windsor Company acquired an 80% interest in the common stock of Sheridan Company for $ 1,541,800 on July 1, 2022. Sheridan Company's stockholders' equity on that date consisted of: Common stock $801, 400 Other contributed capital 400, 400 Retained earnings 332,300 Compute the total noncontrolling interest to be reported in the consolidated balance sheet assuming the: (1) parent company concept. (2) economic unit concept. Total Noncontrolling Interest (1) Parent company concept $ (2) Economic unit concept $arrow_forwardPrior to being united in a business combination, Atkins, Inc., and Waterson Corporation had the following stockholders’ equity figures:Atkins issues 51,000 new shares of its common stock valued at $3 per share for all of the outstanding stock of Waterson. Immediately afterward, what are consolidated Additional Paid-In Capital and Retained Earnings, respectively?a. $104,000 and $300,000b. $110,000 and $410,000c. $192,000 and $300,000d. $212,000 and $410,000arrow_forwardFollowing are separate income statements for Austin, Inc., and its 80 percent–owned subsidiary, Rio Grande Corporation as well as a consolidated statement for the business combination as a whole. Additional Information • Annual excess fair over book value amortization of $25,000 resulted from the acquisition. • The parent applies the equity method to this investment. • Austin has 50,000 shares of common stock and 10,000 shares of preferred stock outstanding. Owners of the preferred stock are paid an annual dividend of $40,000, and each share can be exchanged for two shares of common stock. • Rio Grande has 30,000 shares of common stock outstanding. The company also has 5,000 stock warrants outstanding. For $10, each warrant can be converted into a share of Rio Grande’s common stock. Austin holds half of these warrants. The price of Rio Grande’s common stock was $20 per share throughout the year. • Rio Grande also has convertible bonds, none of which Austin owned. During the current…arrow_forward
- Parent Company owns 80,000 shares of Subsidiary Company’s 100,000 outstanding ordinary shares, acquired at bookvalue. The December 31, 20x8, consolidated balance sheet presented by Parent and Subsidiary included net assets ofSubsidiary in the amount of P600,000. On January 1, 20x9, Parent sells 10,000 shares (10%) of its Subsidiary stock tounrelated parties for P70,000.Determine the gain or loss on disposal of shares to be recognized in the PROFIT OR LOSS STATEMENT.arrow_forwardParent Company acquired 80% of the ordinary shares of Subsidiary Company at a time when Subsidiary’s book values and fair values were equal. Selected financial data are available for 2022 (see image below).Intercompany sales are as follows (see image below).How much is the Consolidated Net Income? please explain.arrow_forwardABC Co. acquired 60% interest in DEF Co. On January 1,2021. Information on the combining entities' accounts right after the business combination follows: ABC Co. (carrying Amount) 1,296,000 360,000 (240,000) 1,416,000 DEF Co. (carrying Amount) Other Assets Investment in Subsidiary Liabilities 444,000 (96,000) 348,000 Net assets How much is the consolidated total assets?arrow_forward
- Computing consolidated earnings per share (EPS) Assume the following facts about a parent and its 75% owned subsidiary company. Parent Net income $180,000 Common shares outstanding 50,000 Convertible preferred stock Dividends - $17,100 Convertible bonds Convertible into 9,000 shares of common stock a. Compute basic earnings per share $ 3.93 b. Compute diluted earnings per share $ 3.62 x Subsidiary $45,000 22,000 (16,500-75% owned by pare Interest expere after tax-$7,200 Convertible into 4,500 shares of common stockarrow_forwardParent Company purchased 100 percent of Subsidiary Corporation's stock on January 1, X1, for $250,000 cash. At date of acquisition, Subsidiary's Share Capital and RE amounted to $50,000 and $10,000 respectively. Summarized statements of financial position of the companies on December 31, X3, are presented below. Parent Subsidiary Assets Cash Investment $100,000 250,000 $25,000 Other assets 225,000 125,000 Total assets $575,000 $150,000 Liabilities and equity Current liabilities $25,000 $35,000 Share capital 150,000 50,000 Retained earnings 400,000 65,000 Total liabilities and equity $575,000 $150,000 Fair values of Subsidiary were equal to book values except for buildings, which had a fair value of $100,000 in excess of net book value (remaining useful life of 10 years). Goodwill has not been impaired since acquisition. No dividends were declared in X3. Profit for the year…arrow_forward1. Matray acquired 16,000 ordinary shares of Petros on 1 April 20X9. On 31 December 20X8Petros’s accounts showed a share premium of $4,000 and retained earnings of $15,000. The fairmarket value of non-controlling interest at acquisition was $7,000.Below are the statements of financial position for the two companies as at 31 December 20X9:Matray PetrosNon-current assets:Property, plant and equipment 39,000 33,000Investment in Petros 50,000Current assets 78,000 40,000Total assets 167,000 73,000Equity and liabilitiesEquityOrdinary shares of: $1 each 100,000: 50c each 10,000Share premium 7,000 4,000Retained earnings 40,000 39,000Current liabilities 20,000 20,000Total equity and liabilities 167,000 73,000Required:Prepare the consolidated statement of financial position of Matray as at 31 December 20X9. Assumeprofits have accrued evenly throughout the yeararrow_forward
- Company A owns 80% of Company B. Company B owns 60% of Company C. From a consolidated viewpoint, does A control C? How will $10,000 of Company C income flow to the members of the consolidated firms when it is distributed at year-end?arrow_forwardComputing consolidated earnings per share (EPS) Assume the following facts about a parent and its 75% owned subsidiary company: Parent Net income $200,000 50,000 Common shares outstanding Convertible preferred stock Convertible bonds Dividends = $19,300 Convertible into 9,000 shares of common stock a. Compute basic earnings per share $ 3.93 X b. Compute diluted earnings per share $ 4.28 X Subsidiary $47,000 26,000 (19,500 = 75% owned by parent) Interest expense after tax = $5,800Convertible into 7,000 shares of common stockarrow_forwardPower Corporation acquired 70 percent of Silk Corporation’s common stock on December 31, 20x2. Balance sheet datafor the two companies immediately following acquisition follow: 7. What amount of consolidated retained earnings will be reported? A.P 295,000 C. P 232,000B. P 268,000 D. P 205,0008. What amount of stockholders; equity will be reported?A. P 355,000 C. P 419,500B. P 397,000arrow_forward
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning