Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Chapter 9, Problem 9.9E
(a)
To determine
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
The
(a)
Expert Solution
Explanation of Solution
Journal entries recorded by B company for its investment in C company is as follows:
| Date | Particulars | Debit ($) | Credit ($) |
| January 1, 20X3 | Investment in C company's stock | 120,000 | |
| To cash | 120,000 | ||
| (Recording entry for purchase of stock of C company by B company) | |||
| December 31, 20X3 | Cash | 9000 | |
| To Investment in C company's stock ($15000*60%) | 9000 | ||
| (Recording entry for receiving dividend from C company) | |||
| December 31, 20X3 | Investment in C company's stock | 24,000 | |
| To Income from C company ($40,000*60%) | 24,000 | ||
| (Recording entry for receiving income from C company on investment) |
(b)
To determine
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
The journal entries recorded by A company for its investment in B company.
(b)
Expert Solution
Explanation of Solution
Journal entries recorded by A company for its investment in B company is as follows:
| Date | Particulars | Debit ($) | Credit ($) |
| January 1, 20X3 | Investment in B company's stock | 315,000 | |
| To cash | 315,000 | ||
| (Recording entry for purchase of stock of B company by A company) | |||
| December 31, 20X3 | Cash | 45,000 | |
| To Investment in B company's stock ($50000*90%) | 45,000 | ||
| (Recording entry for receiving dividend from B company) | |||
| December 31, 20X3 | Investment in B company's stock | 129,600 | |
| To Income from B company ($120,000+$24000) *90%) | 129,600 | ||
| (Recording entry for receiving income from C company on investment) |
(c)
To determine
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
The consolidated entries related to B company’s investment in C company and A company’s investment in B company.
(c)
Expert Solution
Explanation of Solution
Consolidated entries related to B company’s investment in C company is as follows:
| Date | Particulars | Debit ($) | Credit ($) |
| December 31, 20X3 | Common stock | 100,000 | |
| Additional capital | 60,000 | ||
| 40,000 | |||
| Income from C company | 24,000 | ||
| Non-controlling interest of C company | 16,000 | ||
| To Dividend declared | 15,000 | ||
| To Investment in C company | 135,000 | ||
| Non-controlling interest in Net asset of C company | 90,000 | ||
| (Consolidated entry of investment in C company by B company) |
Working Note:
| Particulars | NCI 40% | B company 60% | = | Common Stock + | Additional Paid-In Capital + | Retained Earnings |
| Original book value | $80,000 | $1,20,000 | = | $1,00,000 | $60,000 | $40,000 |
| + Net Income | $16,000 | $24,000 | = | $40,000 | ||
| - Dividends | ($6,000.00) | ($9,000) | = | ($15,000) | ||
| Ending book value | $90,000 | $1,35,000 | = | $1,00,000 | $60,000 | $65,000 |
Consolidated journal entries related to A company’s investment in B company is as follows:
| Date | Particulars | Debit ($) | Credit ($) |
| December 31, 20X3 | Common stock | 150000 | |
| Additional capital | 60000 | ||
| Retained earnings | 140000 | ||
| Income from C company | 129600 | ||
| Non-controlling interest of B company | 14400 | ||
| To Dividend declared | 50000 | ||
| To Investment in B company | 399600 | ||
| Non-controlling interest in Net asset of B company | 44400 | ||
| (Consolidated entry of investment in B company by A company) |
Working note:
| Particulars | NCI 10% | A company 90% | = | Common Stock + | Additional Paid-In Capital + | Retained Earnings |
| Original book value | $35,000 | $3,15,000 | = | $1,50,000 | $60,000 | $1,40,000 |
| + Net Income | $14,400 | $1,29,600 | = | $1,44,000 | ||
| - Dividends | ($5,000.00) | ($45,000) | = | ($50,000) | ||
| Ending book value | $44,400 | $3,99,600 | = | $1,50,000 | $60,000 | $2,34,000 |
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Chapter 9 Solutions
Advanced Financial Accounting
Ch. 9 - Prob. 9.1QCh. 9 - Prob. 9.2QCh. 9 - Prob. 9.3QCh. 9 - Prob. 9.4QCh. 9 - Prob. 9.5QCh. 9 - Prob. 9.6QCh. 9 - Prob. 9.7QCh. 9 - Prob. 9.8QCh. 9 - Prob. 9.9QCh. 9 - Prob. 9.10Q
Ch. 9 - Prob. 9.11QCh. 9 - Prob. 9.12QCh. 9 - Prob. 9.13QCh. 9 - Prob. 9.14QCh. 9 - Prob. 9.15QCh. 9 - Prob. 9.16QCh. 9 - Prob. 9.1CCh. 9 - Prob. 9.2CCh. 9 - Prob. 9.3CCh. 9 - Prob. 9.4CCh. 9 - Prob. 9.5CCh. 9 - Prob. 9.1.1ECh. 9 - Prob. 9.1.2ECh. 9 - Prob. 9.1.3ECh. 9 - Prob. 9.1.4ECh. 9 - Prob. 9.2.1ECh. 9 - Prob. 9.2.2ECh. 9 - Prob. 9.2.3ECh. 9 - Prob. 9.2.4ECh. 9 - Prob. 9.2.5ECh. 9 - Prob. 9.3ECh. 9 - Prob. 9.4ECh. 9 - Prob. 9.5ECh. 9 - Prob. 9.6ECh. 9 - Prob. 9.7ECh. 9 - Prob. 9.8ECh. 9 - Prob. 9.9ECh. 9 - Prob. 9.10ECh. 9 - Prob. 9.11ECh. 9 - Subsidiary Stock Dividend Stake Company reported...Ch. 9 - Prob. 9.13ECh. 9 - Prob. 9.14ECh. 9 - Prob. 9.15ECh. 9 - Prob. 9.16ECh. 9 - Prob. 9.17.1PCh. 9 - Prob. 9.17.2PCh. 9 - Prob. 9.17.3PCh. 9 - Prob. 9.17.4PCh. 9 - Prob. 9.17.5PCh. 9 - Prob. 9.18PCh. 9 - Prob. 9.19PCh. 9 - Prob. 9.20PCh. 9 - Prob. 9.21PCh. 9 - Prob. 9.22PCh. 9 - Prob. 9.23PCh. 9 - Prob. 9.24PCh. 9 - Prob. 9.25PCh. 9 - Prob. 9.26PCh. 9 - Prob. 9.27P
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