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CHAPTER 5
CONSOLIDATION OF LESS-THAN-WHOLLY-OWNED SUBSIDIARIES ACQUIRED AT
MORE THAN BOOK VALUE
ANSWERS TO QUESTIONS
Q5-1 The noncontrolling interest is reported as a separate item in the stockholders equity
section of the balance sheet. Past practice often presented the noncontrolling interest between
long-term liabilities and stockholders equity.
Q5-2 The consolidated balance sheet always includes 100 percent of the subsidiarys assets
and liabilities. When the parent holds less than 100 percent ownership of the subsidiary, the
noncontrolling interests claim on those net assets must be reported.
Q5-3 The income statement portion of the consolidation worksheet is expanded to include a
line for income assigned to the noncontrolling interest. This amount is deducted from
consolidated net income in computing income to the controlling interest. The balance sheet
portion of the worksheet also is expanded to include the claim of the noncontrolling
shareholders on the net assets of the subsidiary.
Q5-4 The balance assigned to the noncontrolling interest is based on the fair value of the
noncontrolling interest at the date of acquisition.
Q5-5 Consolidated retained earnings includes only amounts attributable to the shareholders of
the parent company. Thus, none of the retained earnings is assigned to the noncontrolling
interest.
Q5-6 One hundred percent of the fair value of the subsidiarys assets is included.
Q5-7 The amount of goodwill at the date of acquisition is determined by deducting the fair
value of the net assets of the acquired company from the sum of the fair value of the
consideration given by the acquiring company and the fair value of the noncontrolling interest.
The resulting goodwill must be apportioned between the controlling and noncontrolling interest.
Under normal circumstances, goodwill apportioned to the noncontrolling interest will equal the
excess of the fair value of the noncontrolling interest over its proportionate share of the fair
value of the net assets of the acquired company.
Q5-8 Income assigned to the noncontrolling interest normally is a proportionate share of the
net income of the subsidiary.
Q5-9 Income assigned to noncontrolling shareholders is reported as a deduction from
consolidated net income in arriving at income assigned to the parent company shareholders.
Q5-10 Dividends paid to noncontrolling shareholders are eliminated in preparing the
consolidated statement of retained earnings. Only dividends paid to the parent company
shareholders are reported as dividends distributed to shareholders.
5-1
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
Q5-11 When the parent owns all the shares of a subsidiary (and the subsidiary has no other
publicly traded securities outstanding), it is free to decide whether it wishes to publish separate
statements for the subsidiary. In some cases creditors, regulatory boards, or other interested
parties may insist that such statements be produced. If the parent does not own all the shares of
the subsidiary, the subsidiary normally would be expected to publish separate financial
statements for distribution to the noncontrolling shareholders. In general, the consolidated
statements are published for use by parent company shareholders and are likely to be of little
use to shareholders of the subsidiary.
Q5-12 Other comprehensive income elements reported by the subsidiary must be included in
other comprehensive income in the consolidated financial statement. If the subsidiary is not
wholly owned, income assigned to the noncontrolling interest will include a proportionate share
of the subsidiarys other comprehensive income.
Q5-13 The parents portion of the subsidiarys other comprehensive income is included in
comprehensive income attributable to the controlling interest.
Q5-14 Prior to FASB 141R (ASC 805), the differential was computed as the difference between
the fair value of the consideration given in acquiring ownership of the subsidiary and the
parents portion of the book value of the subsidiarys net assets.
Q5-15 Prior to FASB 141R (ASC 805), goodwill was reported as the difference between the
fair value of the consideration given in acquiring ownership of the subsidiary and the parents
portion of the fair value of the subsidiarys net assets.
Q5-16 Prior to FASB 141R (ASC 805), consolidated net income was computed by deducting
income to noncontrolling interest from consolidated revenues less expenses.
Q5-17* The only effect of a negative balance in retained earnings is the need for a credit to
subsidiary retained earnings, rather than a debit to retained earnings, when the stockholders
equity accounts of the subsidiary and the investment account of the parent are eliminated.
Q5-18* In the period in which the land is sold, the gain or loss recorded by the subsidiary must
be adjusted by the amount of the differential assigned to the land. When the differential is
assigned in the worksheet eliminating entries at the end of the period, a debit will be made to
the gain or loss on sale of land that came to the worksheet from the subsidiarys books.
5-2
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
SOLUTIONS TO CASES
C5-1 Consolidation Worksheet Preparation
a. If the parent company is using the equity method, the elimination of the income recognized by
the parent from the subsidiary generally should not be equal to a proportionate share of the
subsidiarys dividends. If the parent has recognized only dividend income from the subsidiary, it
is using the cost method.
b. It should be possible to tell if the preparer has included the parent's share of the subsidiary's
reported income in computing consolidated net income. It is not possible to tell from looking at
the worksheet alone whether or not all the adjustments that should have been made for
amortization of the differential or to eliminate unrealized profits have been properly treated in
computing the consolidated net income.
c. If the parent paid more than its proportionate share of the fair value of the subsidiarys net
assets, the eliminating entries relating to that subsidiary should show amounts assigned to
individual asset accounts for fair value adjustments and to goodwill when the investment
account balance is eliminated and any noncontrolling interest is established in the worksheet. It
should be relatively easy to determine if this has occurred by examining the consolidation
worksheet.
d. If the preparer has made a separate entry in the worksheet to eliminate the change in the
parents investment account during the period, the easiest way to ascertain the parents
subsidiary ownership percentage is to determine the percentage share of the subsidiarys
dividends eliminated in that entry. Another approach might be to divide the total amount of the
parents subsidiary investment account eliminated in the worksheet by the sum of the total
parents investment account eliminated and the total amount of the noncontrolling interest
established in the worksheet through eliminating entries. However, this approach assumes that
the fair value of the consideration given by the parent when acquiring its subsidiary interest and
the fair value of the noncontrolling interest on that date were proportional, which is usually, by
not always, the case.
5-3
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
Treasurer
Standard Company
FROM:
RE:
, Accounting Staff
Allocation of Consolidated Income to Parent and Noncontrolling
Shareholders
FASB 160 (ASC 810) specifies that consolidated net income reflects the income of the entire
consolidated entity and that consolidated net income must be allocated between the controlling
and noncontrolling interests. Earnings per share reported in the consolidated income statement
is based on the income allocated to the controlling interest only.
Consolidated net income increased by $34,000 from 20X4 to 20X5, an increase of 52 percent.
However, consolidated net income allocated to the controlling interest increased by $24,100
from 20X4 to 20X5, an increase of only 38 percent. The increase in the controlling interests
share of consolidated net income did not keep pace with the increase in sales because nearly
all of the sales increase was experienced by Jewel, which has a very low profit margin. In
addition the parent receives only 55 percent of the increased profits of the subsidiary.
Consolidated net income for the two years is computed and allocated as follows:
20X4
$160,000 (a)
(94,000)(c)
$ 66,000
(2,700)(e)
$ 63,300
Consolidated revenues
Operating costs
Consolidated net income
Income to noncontrolling shareholders
Income to controlling shareholders
(a)
(b)
(c)
(d)
(e)
(f)
$100,000 + $60,000
$120,000 + $280,000
($100,000 x .40) + ($60,000 x .90)
($120,000 x .40) + ($280,000 x .90)
($60,000 x .10 x .45)
($280,000 x .10 x .45)
Primary citations:
FASB 160 (ASC 810)
Secondary source:
ARB 51 (ASC 810)
5-4
20X5
$400,000 (b)
(300,000)(d)
$100,000
(12,600) (f)
$ 87,400
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
Financial Vice-President
Rose Corporation
From:
Re:
, Senior Accountant
Pro Rata Consolidation of Joint Venture
This memo is in response to your request for additional information on the desirability of using
pro rata consolidation rather than equity method reporting for Rose Corporations investment in
its joint venture with Krome Company. The equity method is used by most companies in
reporting their investments in corporate joint ventures. [APB Opinion, Par. 16; ASC 323]
While APB 18 provides guidance for joint ventures that have issued common stock, it does not
provide guidance for ownership of noncorporate entities. Interpretation No. 2 to APB 18 (ASC
323) suggests that the equity method would be appropriate for unincorporated entities as well.
[APB 18, Int. #2]
Assuming the joint venture with Krome Company is unincorporated, Rose owns an undivided
interest in each asset held by the joint venture and is liable for its share of each of its liabilities
and, under certain circumstances, the entire amount. In this case, it can be argued pro rata
consolidation provides a more accurate picture of Roses assets and liabilities, although not all
agree with this assertion. Pro rata consolidation is generally considered not acceptable in this
country, although it is a widely used industry practice in a few industries such as oil and gas
exploration and production. If the joint venture is incorporated, Rose does not have a direct
claim on the assets of the joint venture and Roses liability is sheltered by the joint ventures
corporate structure. In this case, continued use of the equity method appears to be appropriate.
Primary citations:
APB 18; ASC 323
APB 18, INT #2
5-5
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-6
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-7
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
SOLUTIONS TO EXERCISES
E5-1 Multiple-Choice Questions on Consolidation Process
1. d
2. d
3. b
4. d [AICPA Adapted]
E5-2 Multiple-Choice Questions on Consolidation [AICPA Adapted]
1. b
2. c
3. a
4. c
5-8
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
49,200
49,200
Game Corp.
60%
22,800
34,200
Common
Stock
20,000
Retained
Earnings
37,000
6/10/X8
Goodwill = 0
Identifiable excess
= 15,000
$49,200
Initial
investment in
Amber Corp.
60%
Book value =
34,200
10,000
20,000
37,000
34,200
22,800
Game Corp.
60%
15,000
5-9
Inventory
5,000
Buildings &
Equipment
20,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5,000
20,000
15,000
10,000
E5-3 (continued)
Investment in
Amber Corp.
Acquisition
Price
49,200
34,200
15,000
Basic
Excess Reclass.
b.
Journal entries used to record transactions, adjust account balances, and close income
and revenue accounts at the end of the period are recorded in the company's books and
change the reported balances. On the other hand, eliminating entries are entered only in
the consolidation worksheet to facilitate the preparation of consolidated financial
statements. As a result, they do not change the balances recorded in the company's
accounts and must be reentered each time a consolidation worksheet is prepared.
$140,000
b. Land
$ 60,000
c.
$550,000
$470,000
117,500
$587,500
$450,000
20,000
(10,000)
70,000
(530,000)
$ 57,500
$117,500
5-10
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
900
900
270,000
270,000
Power Co.
90%
28,000
Common
Stock
252,000
60,000
Goodwill = 0
Identifiable excess
= 18,000
90%
Book value =
252,000
$270,000
Initial
investment in
Pleasantdale
Dairy
60,000
220,000
252,000
28,000
5-11
Retained
Earnings
220,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-5 (continued)
Excess Value (Differential) Calculations:
NCI
Power Co.
+
10%
90%
Beginning balances
2,000
18,000
Land
20,000
20,000
18,000
2,000
8,900
8,900
Investment in
Pleasantdale Dairy
Acquisition
Price
270,000
252,000
18,000
Basic
Excess Reclass.
0
Power
Co.
Pleasantdale
Dairy
Elimination Entries
DR
CR
Consolidated
Balance Sheet
Cash and Receivables
130,900
70,000
Inventory
210,000
90,000
70,000
40,000
390,000
220,000
270,000
Land
8,900
192,000
300,000
20,000
130,000
610,000
252,000
18,000
Total Assets
1,070,900
420,000
20,000
80,000
40,000
8,900
Long-Term Liabilities
200,000
100,000
Common Stock
400,000
60,000
60,000
Retained Earnings
390,900
220,000
220,000
Current Payables
278,900
1,232,000
111,100
300,000
400,000
390,900
28,000
30,000
2,000
Total Liabilities & Equity
1,070,900
420,000
5-12
288,900
28,000
1,232,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
102,200
102,200
37,500
Zenith
Corp.
70%
Common
Stock
87,500
40,000
Retained
Earnings
85,000
12/31/X4
Goodwill = 0
Identifiable excess
= 14,700
$102,200
Initial
investment in
Down Corp.
70%
Book value =
87,500
40,000
85,000
87,500
37,500
6,300
14,700
5-13
Inventory
6,000
Buildings &
Equipment
15,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-6 (continued)
Excess value (differential) reclassification entry:
Inventory
Buildings & Equipment
Investment in Down Corp.
NCI in NA of Down Corp.
6,000
15,000
14,700
6,300
12,500
12,500
80,000
80,000
Investment in
Down Corp.
Acquisition
Price
102,200
87,500
14,700
Basic
Excess Reclass.
0
b.
Zenith
Corp.
Down
Corp.
50,300
90,000
130,000
60,000
410,000
(150,000)
102,200
21,000
44,000
75,000
30,000
250,000
(80,000)
Total Assets
692,500
340,000
101,000
Accounts Payable
Mortgage Payable
Common Stock
Retained Earnings
NCI in NA of Down Corp.
152,500
250,000
80,000
210,000
35,000
180,000
40,000
85,000
12,500
692,500
Balance Sheet
Cash
Accounts Receivable
Inventory
Land
Buildings & Equipment
Less: Accumulated Depreciation
Investment in Down Corp.
340,000
5-14
Elimination Entries
DR
CR
12,500
6,000
15,000
80,000
80,000
87,500
14,700
194,700
40,000
85,000
137,500
37,500
6,300
43,800
Consolidated
71,300
121,500
211,000
90,000
595,000
(150,000)
0
938,800
175,000
430,000
80,000
210,000
43,800
938,800
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-6 (continued)
c.
$ 71,300
121,500
211,000
90,000
$595,000
(150,000)
Accounts Payable
Mortgage Payable
Stockholders Equity:
Controlling Interest:
Common Stock
Retained Earnings
Total Controlling Interest
Noncontrolling Interest
Total Stockholders Equity
Total Liabilities and Stockholders' Equity
5-15
445,000
$938,800
$175,000
430,000
$ 80,000
210,000
$290,000
43,800
333,800
$938,800
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
390,000
390,000
90,000
Temple
Corp.
75%
Common
Stock
270,000
Retained
Earnings
120,000
240,000
12/31/X4
Goodwill = 33,000
Identifiable excess
= 87,000
75%
Book value =
270,000
$390,000
Initial
investment in
Dynamic
Corp.
120,000
240,000
270,000
90,000
Buildings
80,000
5-16
Inventories
36,000
Goodwill
44,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
90,000
90,000
Glitter
Enterprises
60%
60,000
90,000
Common
Stock
140,000
1/1/X5
Goodwill = 0
Identifiable excess
=0
$90,000
Initial
investment in
Lowtide
Builders
60%
Book value =
90,000
140,000
10,000
90,000
60,000
Investment in
Lowtide Builders
Acquisition Price
90,000
90,000
Basic
5-17
Retained
Earnings
10,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-8 (continued)
b.
Glitter
Enterprises
Lowtide
Builders
Elimination Entries
DR
CR
Consolidated
Balance Sheet
Cash and Receivables
80,000
30,000
110,000
Inventory
150,000
350,000
500,000
430,000
80,000
510,000
90,000
90,000
1,120,000
750,000
460,000
Current Liabilities
100,000
110,000
210,000
Long-Term Debt
400,000
200,000
600,000
Common Stock
200,000
140,000
140,000
200,000
50,000
10,000
10,000
50,000
c.
Total Assets
Retained Earnings
90,000
750,000
460,000
150,000
60,000
60,000
60,000
1,120,000
$ 110,000
500,000
510,000
$1,120,000
Current Liabilities
Long-Term Debt
Stockholders Equity:
Controlling Interest:
Common Stock
Retained Earnings
Total Controlling Interest
Noncontrolling Interest
Total Stockholders Equity
Total Liabilities and Stockholders' Equity
$ 210,000
600,000
5-18
$200,000
50,000
$250,000
60,000
310,000
$1,120,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
$215,000
2.
$40,000
3.
$1,121,000
4.
$701,500
5.
$64,500
6.
7.
$ 791,500
(150,500)
$ 641,000
405,000
$1,046,000
15,000
20,000
40,000
$1,121,000
$205,000
$419,500
5-19
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
210,000
210,000
14,000
14,000
3,500
3,500
Horrigan
Corp.
70%
Common
Stock
Retained
Earnings
90,000
6,000
(1,500)
210,000
14,000
(3,500)
200,000
100,000
20,000
(5,000)
94,500
220,500
200,000
115,000
1/1/X9
12/31/X9
Goodwill = 0
Goodwill = 0
Identifiable excess
=0
70%
Book value =
210,000
$210,000
Initial
investment in
Farmstead
Co.
5-20
Excess = 0
70%
Book value =
220,500
$220,500
Net
investment
in
Farmstead
Co.
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-10 (continued)
Basic elimination entry
Common stock
Retained earnings
Income from Farmstead Co.
NCI in NI of Farmstead Co.
Dividends declared
Investment in Farmstead Co.
NCI in NA of Farmstead Co.
200,000
100,000
14,000
6,000
5,000
220,500
94,500
Investment in
Farmstead Co.
Acquisition Price
70% Net Income
210,000
14,000
3,500
Ending Balance
Income from
Farmstead Co.
70% Net Income
14,000
Ending Balance
70% Dividends
220,500
220,500
14,000
Basic
14,000
0
5-21
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
133,500
133,500
22,500
22,500
9,000
9,000
3,000
3,000
West
Corp.
75%
Common
Stock
Retained
Earnings
37,500
7,500
(3,000)
112,500
22,500
(9,000)
60,000
90,000
30,000
(12,000)
42,000
126,000
60,000
108,000
1/1/X3
12/31/X3
Goodwill = 0
Goodwill = 0
Identifiable excess
= 21,000
Excess = 18,000
$133,500
Initial
investment in
Canton Corp.
75%
Book value =
112,500
5-22
75%
Book value =
126,000
$144,000
Net
investment in
Canton
Corp.
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-11 (continued)
Basic elimination entry
Common stock
Retained earnings
Income from Canton Corp.
NCI in NI of Canton Corp.
Dividends declared
Investment in Canton Corp.
NCI in NA of Canton Corp.
60,000
90,000
22,500
7,500
12,000
126,000
42,000
Equipment
Acc. Depr.
7,000
(1,000)
21,000
(3,000)
28,000
0
(4,000)
6,000
18,000
28,000
(4,000)
4,000
3,000
1,000
28,000
4,000
18,000
6,000
Investment in
Canton Corp.
Acquisition Price
75% Net Income
133,500
22,500
9,000
3,000
Ending Balance
Income from
Canton Corp.
75% Dividends
Excess Val. Amort.
Basic
18,000
Excess Reclass.
19,500
Ending Balance
3,000
144,000
126,000
22,500
22,500
3,000
0
5-23
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
$120,000
380,000
$500,000
x
.90
$450,000
36,000
$486,000
54,000
(7,200)
(18,000)
$514,800
b.
Equity Method Entries on Major Corp.'s Books:
Investment in Lancaster Co.
Cash
486,000
486,000
54,000
54,000
18,000
18,000
7,200
7,200
Major
Corp.
90%
Common
Stock
Retained
Earnings
50,000
6,000
(2,000)
450,000
54,000
(18,000)
120,000
380,000
60,000
(20,000)
54,000
486,000
120,000
420,000
5-24
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-12 (continued)
1/1/X1
12/31/X1
Goodwill = 0
Goodwill = 0
Identifiable excess
= 36,000
Excess = 28,800
$486,000
Initial
investment in
Lancaster
Co.
90%
Book value =
450,000
90%
Book value =
486,000
120,000
380,000
54,000
6,000
20,000
486,000
54,000
3,200
Patents
40,000
(8,000)
28,800
32,000
8,000
7,200
800
5-25
$514,800
Net
investment in
Lancaster
Co.
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-12 (continued)
Excess value (differential) reclassification entry:
Patents
Investment in Lancaster Co.
NCI in NA of Lancaster Co.
32,000
28,800
3,200
Investment in
Lancaster Co.
Acquisition
Price
90% Net Income
486,000
54,000
18,000
7,200
Ending Balance
Income from
Lancaster Co.
90% Dividends
Excess Val. Amort.
Basic
28,800
Excess Reclass.
46,800
Ending Balance
7,200
514,800
486,000
54,000
54,000
7,200
0
5-26
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
190,000
190,000
40,000
Pioneer Corp.
80%
160,000
Common
Stock
120,000
Retained
Earnings
80,000
1/1/X2
Goodwill = 4,400
Identifiable excess
= 25,600
$190,000
Initial
investment in
Lowe Corp.
80%
Book value =
160,000
120,000
80,000
160,000
40,000
7,500
30,000
5-27
Buildings
32,000
Goodwill
5,500
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-13 (continued)
Excess value (differential) reclassification entry:
Buildings
Goodwill
Investment in Lowe Corp.
NCI in NA of Lowe Corp.
32,000
5,500
30,000
7,500
Investment in
Lowe Corp.
Acquisition Price
190,000
160,000
30,000
Basic
Excess Reclass.
0
b.
Equity Method Entries on Pioneer Corp.'s Books:
Investment in Lowe Corp.
Cash
190,000
190,000
32,000
32,000
3,200
3,200
Pioneer
Corp.
80%
Common
Stock
Retained
Earnings
40,000
8,000
0
160,000
32,000
0
120,000
80,000
40,000
0
48,000
192,000
120,000
120,000
5-28
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-13 (continued)
1/1/X2
12/31/X2
Goodwill = 4,400
Goodwill = 4,400
Identifiable excess
= 25,600
Excess = 22,400
$218,800
Net
investment in
Lowe Corp.
$190,000
Initial
investment in
Lowe Corp.
80%
Book value =
192,000
80%
Book value =
160,000
120,000
80,000
32,000
8,000
192,000
48,000
Buildings
Acc. Depr.
Goodwill
Beginning balance
Changes
7,500
(800)
30,000
(3,200)
32,000
0
(4,000)
5,500
0
Ending balance
6,700
26,800
32,000
(4,000)
5,500
4,000
3,200
800
5-29
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
32,000
5,500
4,000
26,800
6,700
E5-13 (continued)
Investment in
Lowe Corp.
Acquisition Price
80% Net Income
190,000
32,000
3,200
Ending Balance
Income from
Lowe Corp.
26,800
Excess Reclass.
28,800
Ending Balance
3,200
218,800
192,000
32,000
32,000
3,200
$277,500
185,000
$462,500
(400,000)
$ 62,500
(7,500)
(40,000)
$ 15,000
b.
Equity Method Entries on Knox Corp.'s Books:
Investment in Conway Corp.
Cash
277,500
277,500
5-30
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
160,000
Knox
Corp.
60%
240,000
Common
Stock
50,000
Retained
Earnings
150,000
1/1/X7
Goodwill = 0
Identifiable excess
= 37,500
60%
Book value =
240,000
$277,500
Net
investment in
Conway
Corp.
250,000
150,000
240,000
160,000
5-31
Land
7,500
Equipment
40,000
Patent
15,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
7,500
40,000
15,000
37,500
25,000
Investment in
Conway Corp.
Acquisition
Price
277,500
240,000
37,500
Basic
Excess Reclass.
E5-14 (continued)
c.
Computation of investment account balance at January 1, 20X9:
Fair value of consideration given
Undistributed income since acquisition
($100,000 - $60,000) x .60
Amortization of differential assigned to:
Equipment ($40,000 / 8) x .60 x 2 years
Patents ($15,000 / 10) x .60 x 2 years
Account balance at January 1, 20X9
$277,500
24,000
(6,000)
(1,800)
$293,700
d.
Equity Method Entries on Knox Corp.'s Books:
Investment in Conway Corp.
Income from Conway Corp.
18,000
18,000
6,000
6,000
3,900
3,900
5-32
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
e.
Book Value Calculations:
NCI
40%
Knox
Corp.
60%
Common
Stock
Retained
Earnings
176,000
12,000
(4,000)
264,000
18,000
(6,000)
250,000
190,000
30,000
(10,000)
184,000
276,000
250,000
210,000
E5-14 (continued)
1/1/X7
12/31/X7
Goodwill = 0
Goodwill = 0
Identifiable excess
= 29,700
Excess = 25,800
60%
Book value =
264,000
$293,700
Initial
investment in
Conway
Corp.
60%
Book value =
276,000
250,000
190,000
18,000
12,000
10,000
276,000
184,000
5-33
$301,800
Net
investment in
Conway
Corp.
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
17,200
25,800
Land
Equipment
Patent
Acc.
Depr.
7,500
0
40,000
12,000
(1,500)
(10,000)
(5,000)
7,500
40,000
10,500
(15,000)
1,500
5,000
3,900
2,600
7,500
40,000
10,500
15,000
25,800
17,200
120,000
120,000
24,000
24,000
8,000
8,000
5-34
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
Proud Corp.
80%
Common
Stock
Retained
Earnings
30,000
6,000
(2,000)
120,000
24,000
(8,000)
100,000
50,000
30,000
(10,000)
34,000
136,000
100,000
70,000
E5-15 (continued)
1/1/X3
12/31/X3
Goodwill = 0
Goodwill = 0
Identifiable excess
=0
Excess = 0
$120,000
Initial
investment in
Stergis Co.
80%
Book value =
120,000
$136,000
Net
investment in
Stergis Co.
80%
Book value =
136,000
100,000
50,000
24,000
6,000
10,000
136,000
34,000
5-35
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
Investment in
Stergis Co.
Acquisition Price
80% Net Income
120,000
24,000
8,000
Ending Balance
Income from
Stergis Co.
Basic
24,000
Ending Balance
24,000
80% Dividends
136,000
136,000
24,000
60,000
60,000
5-36
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-15 (continued)
b.
Proud
Corp.
Stergis
Co.
Elimination Entries
DR
CR
Consolidated
Income Statement
Sales
200,000
120,000
320,000
(25,000)
(15,000)
(40,000)
(105,000)
(75,000)
(180,000)
24,000
94,000
30,000
24,000
24,000
100,000
6,000
(6,000)
94,000
30,000
30,000
230,000
50,000
50,000
94,000
30,000
30,000
(40,000)
(10,000)
Ending Balance
284,000
70,000
Current Assets
173,000
105,000
Depreciable Assets
500,000
300,000
(175,000)
(75,000)
94,000
80,000
230,000
0
94,000
10,000
(40,000)
10,000
284,000
Balance Sheet
136,000
Total Assets
634,000
330,000
278,000
60,000
60,000
60,000
740,000
(190,000)
136,000
196,000
828,000
Current Liabilities
50,000
40,000
90,000
Long-Term Debt
100,000
120,000
220,000
Common Stock
200,000
100,000
100,000
Retained Earnings
284,000
70,000
80,000
634,000
330,000
5-37
180,000
200,000
10,000
284,000
34,000
34,000
44,000
828,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-15 (continued)
c.
Current Assets
Depreciable Assets
Less: Accumulated Depreciation
Total Assets
$278,000
$740,000
(190,000)
Current Liabilities
Long-Term Debt
Stockholders Equity:
Controlling Interest:
Common Stock
Retained Earnings
Total Controlling Interest
Noncontrolling Interest
Total Stockholders Equity
Total Liabilities and Stockholders' Equity
550,000
$828,000
$ 90,000
220,000
$200,000
284,000
$484,000
34,000
518,000
$828,000
$320,000
$ 40,000
180,000
(220,000)
$100,000
(6,000)
$ 94,000
$230,000
94,000
$324,000
(40,000)
$284,000
5-38
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
28,000
28,000
12,000
12,000
Proud Corp.
80%
Common
Stock
Retained
Earnings
34,000
7,000
(3,000)
136,000
28,000
(12,000)
100,000
70,000
35,000
(15,000)
38,000
152,000
100,000
90,000
1/1/X4
12/31/X4
Goodwill = 0
Goodwill = 0
Identifiable excess
=0
Excess = 0
$136,000
Net
investment in
Stergis Co.
80%
Book value =
136,000
5-39
$152,000
Net
investment in
Stergis Co.
80%
Book value =
152,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-16 (continued)
Basic elimination entry
Common stock
Retained earnings
Income from Stergis Co.
NCI in NI of Stergis Co.
Dividends declared
Investment in Stergis Co.
NCI in NA of Stergis Co.
100,000
70,000
28,000
7,000
15,000
152,000
38,000
Investment in
Stergis Co.
Beginning Balance
80% Net Income
136,000
28,000
12,000
Ending Balance
Income from
Stergis Co.
Basic
28,000
Ending Balance
28,000
0
80% Dividends
152,000
152,000
28,000
60,000
60,000
5-40
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-16 (continued)
b.
Proud
Corp.
Stergis
Co.
Elimination Entries
DR
CR
Consolidated
Income Statement
Sales
230,000
140,000
370,000
(25,000)
(15,000)
(40,000)
(150,000)
(90,000)
(240,000)
28,000
83,000
28,000
35,000
28,000
90,000
7,000
(7,000)
83,000
35,000
35,000
284,000
70,000
70,000
83,000
35,000
35,000
(50,000)
(15,000)
Ending Balance
317,000
90,000
235,000
150,000
83,000
105,000
284,000
0
83,000
15,000
(50,000)
15,000
317,000
Balance Sheet
Current Assets
Depreciable Assets
Less: Accumulated Depreciation
500,000
300,000
(200,000)
(90,000)
385,000
60,000
60,000
740,000
(230,000)
152,000
Total Assets
687,000
360,000
Current Liabilities
70,000
50,000
120,000
Long-Term Debt
100,000
120,000
220,000
Common Stock
200,000
100,000
100,000
Retained Earnings
317,000
90,000
105,000
60,000
687,000
5-41
360,000
205,000
152,000
212,000
895,000
200,000
15,000
317,000
38,000
38,000
53,000
895,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
b.
20X9
$140,000
60,000
(8,000)
$152,000
10,000
$162,000
(8,000)
$192,000
5,000
$197,000
20X8
$162,000
20X9
$197,000
c.
20X8
$120,000
40,000
(10,500)
(14,250)
$151,500 $ 182,750
5-42
20X9
$320,000 $ 320,000
504,000
613,000
7,500
11,250
831,500
944,250
151,750
158,500
$983,250 $1,102,750
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
140,000
140,000
21,000
21,000
17,500
17,500
4,200
4,200
Palmer Corp.
70%
Common
Stock
Retained
Earnings
60,000
9,000
(7,500)
140,000
21,000
(17,500)
120,000
80,000
30,000
(25,000)
61,500
143,500
120,000
85,000
1/1/X8
12/31/X8
Goodwill = 0
Goodwill = 0
Identifiable excess
=0
Excess = 0
$140,000
Initial
investment in
Krown Corp.
70%
Book value =
140,000
5-43
$147,700
Net
investment in
Krown Corp.
70%
Book value =
147,700
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-18 (continued)
Basic elimination entry
Common stock
Retained earnings
Income from Krown Corp.
NCI in NI of Krown Corp.
Dividends declared
Investment in Krown Corp.
NCI in NA of Krown Corp.
120,000
80,000
21,000
9,000
25,000
143,500
61,500
4,200
1,800
4,200
1,800
Investment in
Krown Corp.
Acquisition Price
70% Net Income
140,000
21,000
21,000
17,500
70% Dividends
70% OCI
143,500
4,200
Basic
OCI Entry
4,200
Ending Balance
Income from
Krown Corp.
147,700
21,000
21,000
0
5-44
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
138,000
138,000
29,000
General
Corp.
80%
116,000
Common
Stock
100,000
1/1/X4
Goodwill = 22,000
Identifiable excess
=0
$138,000
Initial
investment in
Strap Co.
80%
Book value =
116,000
100,000
75,000
30,000
116,000
29,000
5-45
Retained
Earnings
(30,000)
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-19*(continued)
Excess Value (Differential) Calculations:
NCI
General Corp.
20%
+
80%
Beginning balances
5,500
Goodwill
22,000
27,500
27,500
22,000
5,500
Investment in
Strap Co.
Acquisition
Price
138,000
116,000
22,000
Basic
Excess Reclass.
864,000
864,000
135,000
135,000
82,350
82,350
5-46
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
b.
Book Value Calculations:
NCI
10%
Worth
Corp.
90%
Common
Stock
72,000
15,000
0
648,000
135,000
0
500,000
87,000
783,000
500,000
Premium
on Com.
Stock
100,000
100,000
Retained
Earnings
120,000
150,000
0
270,000
E5-20* (continued)
12/1/X5
12/31/X5
Goodwill = 45,000
Goodwill = 45,000
Identifiable excess
= 171,000
Excess = 88,650
$864,000
Initial
investment in
Brinker Inc.
90%
Book value =
648,000
$916,650
Net
investment in
Brinker Inc.
90%
Book value =
783,000
500,000
100,000
120,000
135,000
15,000
783,000
87,000
5-47
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
NCI
10%
Beg.
balance
Changes
End.
balance
Worth
Corp.
90%
Inventory
Land
24,000
216,000
5,000
75,000
(9,150)
(82,350)
(5,000)
(75,000)
14,850
133,650
Equipment
60,000
60,000
Disc.
on
notes
payable
Acc.
Depr.
0
50,000
(7,500)
(4,000)
42,500
(4,000)
50,000
5,000
75,000
7,500
4,000
82,350
9,150
E5-20* (continued)
Excess value (differential) reclassification entry:
Equipment
Discount on notes payable
Goodwill
Acc. Depr.
Investment in Brinker Inc.
NCI in NA of Brinker Inc.
60,000
42,500
50,000
4,000
133,650
14,850
SOLUTIONS TO PROBLEMS
P5-21 Multiple-Choice Questions on Applying the Equity Method[AICPA Adapted]
1. a
2. a
3. c
4. d
P5-22 Amortization of Differential
Journal entries recorded by Ball Corporation:
5-48
Goodwill
50,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
120,000
50,000
70,000
12,000
12,000
3,000
3,000
4,575
4,575
P5-22(continued)
Amortization of differential assigned to buildings and equipment:
Fair value of buildings and equipment
$360,000
Book value of buildings and equipment
300,000
Differential
$60,000
Portion of stock held by Ball
x
0.30
Differential assigned to buildings and equipment
$18,000
Remaining life
15
Yearly amortization
$1,200
Amortization of differential assigned to copyrights:
Purchase price
Fair value of Krown's:
Total assets
$560,000
Total liabilities
(250,000)
$310,000
Proportion of stock held by Ball
x
.30
Amount assigned to copyrights
Remaining life
Yearly amortization
5-49
$120,000
(93,000)
$27,000
8
$3,375
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
$ 12,000
(2,800)
-0$ 9,200
$150,000
(128,000)
$
(14,000)
8,000
b.
3,600
c.
$150,000
$150,000
9,200
(3,600)
$155,600
70,000
14,500
70,000
14,500
$ 5,000
5,000
7,500
(1,000)
(1,000)
(1,000)
$14,500
5-50
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
Amortization of differential
20X6 purchase [$25,000 - ($200,000 x .10)]
5 years
20X8 purchase [$15,000 - ($300,000 x .05)]
20X9 purchase [$70,000 - ($350,000 x .20)]
Total annual amortization
(3) Cash
Investment in Phillips Corp. Stock
Record dividend from Phillips Corp:
$20,000 x .35
(4) Investment in Phillips Corp. Stock
Income from Phillips Corp.
Record equity-method income:
$70,000 x .35
$1,000
0
0
$1,000
7,000
7,000
24,500
24,500
5-51
1,000
1,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
$24,000
(9,000)
(1,500)
(750)
$12,750
$165,000
$12,750
(2,700)
10,050
$175,050
210,000
60,000
150,000
210,000
60,000
150,000
(2) Cash
9,000
Investment in Arrow Manufacturing Stock
Record dividends from Arrow Manufacturing: $20,000 x 0.45
(3) Investment in Arrow Manufacturing Stock
Income from Arrow Manufacturing
Record equity-method income: $80,000 x 0.45
36,000
5-52
9,000
36,000
1,350
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-26 (continued)
Equity-method journal entries recorded by Hunter Corporation in 20X1:
(1) Cash
18,000
Investment in Arrow Manufacturing Stock
Record dividends from Arrow Manufacturing: $40,000 x 0.45
18,000
22,500
1,350
$210,000
$34,650
(9,000)
$21,150
(18,000)
25,650
3,150
$238,800
200,000
50,000
150,000
(2) Cash
3,500
Investment in Jackson Corporation Stock
Record dividend from Jackson Corporation: $10,000 x 0.35
(3) Investment in Jackson Corporation Stock
Income from Jackson Corporation
Record equity-method income: $70,000 x 0.35
3,500
24,500
24,500
5-53
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
b.
$220,000
$100,000
11,000
$111,000
x
0.40
44,400
(1,500)
(2,000)
$260,900
130,000
40,000
90,000
Cash
Investment in Blair Corporation Stock
Record dividend from Blair: $30,000 x 0.40
12,000
44,400
3,500
5-54
12,000
44,400
3,500
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
17,000
11,500
28,500
Item
Adjustment to remove dividends
included in investment income and not
removed from investment account
$(14,000)
$(10,000)
$(24,000)
(1,500)
$(11,500)
(3,000)
(1,500)
$(28,500)
(3,000)
$(17,000)
5-55
$4,000
$164,000
(140,000)
$ 24,000
8
3,000
$7,000
(5,500)
$1,500
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
87,500
87,500
37,500
Cameron
Corp.
70%
87,500
Common
Stock
40,000
12/31/X4
Goodwill = 0
Identifiable excess
=0
$87,500
Initial
investment in
Darla Corp.
70%
Book value =
87,500
40,000
85,000
87,500
37,500
5-56
Retained
Earnings
85,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
Investment in
Darla Corp.
Acquisition Price
87,500
87,500
Basic
0
Eliminate intercompany accounts:
Accounts payable
Accounts receivable
12,500
12,500
P5-30 (continued)
Optional accumulated depreciation elimination entry
Accumulated depreciation
Building & equipment
80,000
80,000
b.
Cameron
Corp.
Darla
Corp.
Elimination Entries
DR
CR
Consolidated
Balance Sheet
Cash
Accounts Receivable
Inventory
Land
Buildings & Equipment
Less: Accumulated Depreciation
Investment in Darla Corp.
65,000
21,000
90,000
44,000
130,000
75,000
205,000
60,000
30,000
90,000
410,000
250,000
(150,000)
(80,000)
692,500
Accounts Payable
Mortage Payable
Retained Earnings
12,500
80,000
80,000
87,500
Total Assets
Common Stock
86,000
580,000
(150,000)
87,500
180,000
932,500
340,000
80,000
152,500
35,000
12,500
250,000
180,000
80,000
40,000
40,000
80,000
210,000
85,000
85,000
210,000
692,500
340,000
5-57
175,000
430,000
121,500
137,500
37,500
37,500
37,500
932,500
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
c.
$ 86,000
121,500
205,000
90,000
$660,000
(230,000)
Accounts Payable
Mortgage Payable
Stockholders Equity:
Controlling Interest:
Common Stock
$ 80,000
Retained Earnings
210,000
Total Controlling Interest
$290,000
Noncontrolling Interest
37,500
Total Stockholders equity
Total Liabilities and Stockholders' Equity
P5-31 Majority-Owned Subsidiary Acquired at Greater than Book Value
a.
Equity Method Entries on Porter Corp.'s Books:
Investment in Darla Corp.
Cash
102,200
102,200
37,500
Porter
Corp.
70%
87,500
5-58
Common
Stock
40,000
Retained
Earnings
85,000
430,000
$932,500
$175,000
430,000
327,500
$932,500
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
1/1/X4
Goodwill = 0
Identifiable excess
= 14,700
$102,200
Initial
investment in
Darla Corp.
70%
Book value =
87,500
40,000
85,000
87,500
37,500
6,300
14,700
5-59
Inventory
6,000
Buildings &
Equipment
15,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-31 (continued)
Excess value (differential) reclassification entry:
Inventory
Buildings & Equipment
Investment in Darla Corp.
NCI in NA of Darla Corp.
6,000
15,000
14,700
6,300
12,500
12,500
80,000
80,000
Investment in
Darla Corp.
Acquisition Price
102,200
87,500
14,700
Basic
Excess Reclass.
5-60
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-31 (continued)
Porter
Corp.
Darla
Corp.
Elimination Entries
DR
CR
Consolidated
Balance Sheet
Cash
50,300
21,000
Accounts Receivable
90,000
44,000
130,000
75,000
60,000
30,000
Inventory
Land
Buildings & Equipment
Less: Accumulated Depreciation
Investment in Darla Corp.
71,300
12,500
6,000
121,500
211,000
90,000
410,000
250,000
15,000
(150,000)
(80,000)
80,000
102,200
80,000
595,000
(150,000)
87,500
14,700
Total Assets
692,500
340,000
101,000
Accounts Payable
152,500
35,000
12,500
Mortgage Payable
250,000
180,000
80,000
40,000
40,000
80,000
210,000
85,000
85,000
210,000
Common Stock
Retained Earnings
194,700
938,800
175,000
430,000
37,500
43,800
6,300
Total Liabilities & Equity
692,500
340,000
5-61
137,500
43,800
938,800
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
c.
$ 71,300
121,500
211,000
90,000
$595,000
(150,000)
Accounts Payable
Mortgage Payable
Stockholders Equity:
Controlling Interest:
Common Stock
Retained Earnings
Total Controlling Interest
Noncontrolling Interest
Total Stockholders Equity
Total Liabilities and Stockholders' Equity
445,000
$938,800
$175,000
430,000
$ 80,000
210,000
$290,000
43,800
333,800
$938,800
510,000
500,000
10,000
119,500
Total
Corp.
75%
358,500
5-62
Common
Stock
200,000
Retained
Earnings
148,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
1/1/X8
Goodwill = 66,000
Identifiable excess
= 85,500
75%
Book value =
358,500
$510,000
Initial
investment in
Ticken Tie
Co.
200,000
130,000
148,000
358,500
119,500
5-63
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-32 (continued)
Excess Value (Differential) Calculations:
Total
NCI
Corp.
Inven+
25%
75%
=
tory
Beg.
balances 50,500
151,500
4,000
Land
20,000
Building &
Equipment
50,000
4,000
20,000
50,000
40,000
88,000
151,500
50,500
6,500
6,500
220,000
220,000
Investment in
Ticken Tie Co.
Acquisition Price
510,000
358,500
151,500
Basic
Excess Reclass.
5-64
Patent
40,000
Goodwill
88,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-32(continued)
c.
Balance Sheet
Cash
Receivables
Inventory
Land
Buildings & Equipment
Less: Accumulated Depreciation
Investment in Ticken Tie Co.
Patent
Goodwill
Total Assets
Current Payables
Bonds Payable
Bond Premium
Common Stock
Additional Paid-in Capital
Retained Earnings
NCI in NA of Ticken Tie Co.
Total Liabilities & Equity
Total
Corp.
Ticken
Tie Co.
12,000
39,000
86,000
55,000
960,000
(411,000)
510,000
9,000
30,000
68,000
50,000
670,000
(220,000)
Elimination Entries
DR
CR
6,500
4,000
20,000
50,000
220,000
358,500
151,500
40,000
88,000
422,000
1,251,000
607,000
38,000
700,000
10,000
300,000
100,000
103,000
29,000
100,000
6,500
200,000
130,000
148,000
200,000
130,000
148,000
1,251,000
220,000
607,000
5-65
484,500
736,500
119,500
50,500
170,000
Consolidated
21,000
62,500
158,000
125,000
1,460,000
(411,000)
0
40,000
88,000
1,543,500
60,500
800,000
10,000
300,000
100,000
103,000
170,000
1,543,500
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
d.
$
$
65,500
(3,000)
$1,460,000
(411,000)
Current Payables
Bonds Payable
Premium on Bonds Payable
Stockholders Equity:
Controlling Interest:
Common Stock
Additional Paid-In Capital
Retained Earnings
Total Controlling Interest
Noncontrolling Interest
Total Stockholders Equity
Total Liabilities and
Stockholders' Equity
P5-33 Incomplete Data
$65,000
c.
Skyler: $24,000
9,000
810,000
$1,543,500
b.
40,000
60,500
673,000
1,049,000
40,000
88,000
$1,543,500
$ 300,000
100,000
103,000
$ 503,000
170,000
$15,000
d.
62,500
158,000
125,000
$
$ 800,000
10,000
a.
Blue: $70,000
21,000
5-66
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
$259,000
e.
65 percent
f.
Capital Stock
Retained Earnings
=
=
$120,000
$115,000
Quill
$ 90,000
24,500
$114,500
North
$35,000
Quill
$290,000
114,500
(30,000)
$374,500
North
$40,000
35,000
(10,000)
$65,000
$35,000
d. Consolidated retained earnings at December 31, 20X9, is equal to the $374,500 retained
earnings balance reported by Quill.
e. When the cost method is used, the parent's proportionate share of the increase in retained
earnings of the subsidiary subsequent to acquisition is not included in the parent's retained
earnings. Thus, this amount must be added to the total retained earnings reported by the
parent in arriving at consolidated retained earnings.
5-67
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
96,000
96,000
18,000
18,000
12,000
12,000
5,625
5,625
Power Corp.
75%
Common
Stock
Retained
Earnings
25,000
6,000
(4,000)
75,000
18,000
(12,000)
60,000
40,000
24,000
(16,000)
27,000
81,000
60,000
48,000
1/1/X8
12/31/X8
Goodwill = 6,000
Goodwill = 1,875
Identifiable excess
= 15,000
Excess = 13,500
75%
Book value =
75,000
$96,000
Initial
investment in
Best Co.
5-68
75%
Book value =
81,000
$96,375
Net
investment
in Best Co.
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-35 (continued)
Basic elimination entry
Common stock
Retained earnings
Income from Best Co.
NCI in NI of Best Co.
Dividends declared
Investment in Best Co.
NCI in NA of Best Co.
60,000
40,000
18,000
6,000
16,000
81,000
27,000
Buildings &
Equipment
20,000
20,000
Goodwill
8,000
(5,500)
2,500
20,000
2,500
Investment in
Best Co.
Ending Balance
5,625
1,875
2,000
15,375
5,125
30,000
Income from
Best Co.
96,000
18,000
12,000
5,625
Acc.
Depr.
0
(2,000)
(2,000)
2,000
5,500
Acquisition Price
75% Net Income
75% Dividends
Excess Val. Amort.
Basic
15,375
Excess Reclass.
12,375
Ending Balance
5,625
96,375
81,000
18,000
18,000
5,625
0
5-69
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-35 (continued)
b.
Income Statement
Sales
Less: COGS
Less: Wage Expense
Less: Depreciation Expense
Less: Interest Expense
Less: Other Expenses
Less: Impairment Loss
Income from Best Co.
Consolidated Net Income
NCI in Net Income
Controlling Interest in Net
Income
Power
Corp.
Best Co.
260,000
(125,000)
(42,000)
(25,000)
(12,000)
(13,500)
180,000
(110,000)
(27,000)
(10,000)
(4,000)
(5,000)
Elimination Entries
DR
CR
Consolidated
5,500
18,000
25,500
6,000
5,625
5,625
1,875
440,000
(235,000)
(69,000)
(37,000)
(16,000)
(18,500)
(5,500)
0
59,000
(4,125)
24,000
31,500
7,500
54,875
102,000
54,875
(30,000)
126,875
40,000
24,000
(16,000)
48,000
40,000
31,500
7,500
16,000
23,500
102,000
54,875
(30,000)
126,875
47,500
70,000
90,000
30,000
350,000
(145,000)
96,375
21,000
12,000
25,000
15,000
150,000
(40,000)
20,000
30,000
538,875
183,000
2,500
52,500
Accounts Payable
Wages Payable
Notes Payable
Common Stock
Retained Earnings
NCI in NA of Best Co.
45,000
17,000
150,000
200,000
126,875
16,000
9,000
50,000
60,000
48,000
60,000
71,500
538,875
183,000
131,500
Statement of Retained
Earnings
Beginning Balance
Net Income
Less: Dividends Declared
Ending Balance
Balance Sheet
Cash
Accounts Receivable
Inventory
Land
Buildings & Equipment
Less: Accumulated Depreciation
Investment in Best Co.
Goodwill
Total Assets
12,375
54,875
24,000
54,875
5-70
2,000
71,500
30,000
2,000
81,000
15,375
128,375
23,500
27,000
5,125
55,625
68,500
82,000
115,000
45,000
490,000
(157,000)
0
2,500
646,000
61,000
26,000
200,000
200,000
126,875
32,125
646,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
27,000
27,000
15,000
15,000
1,500
1,500
Power
Corp.
75%
Common
Stock
Retained
Earnings
27,000
9,000
(5,000)
81,000
27,000
(15,000)
60,000
48,000
36,000
(20,000)
31,000
93,000
60,000
64,000
1/1/X9
12/31/X9
Goodwill = 1,875
Goodwill = 1,875
Identifiable excess
= 13,500
Excess = 12,000
$96,375
Net
investment in
Best Co.
75%
Book value =
81,000
$106,875
Net
investment
in Best Co.
75%
Book value =
93,000
5-71
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-36 (continued)
Basic elimination entry
Common stock
Retained earnings
Income from Best Co.
NCI in NI of Best Co.
Dividends declared
Investment in Best Co.
NCI in NA of Best Co.
60,000
48,000
27,000
9,000
20,000
93,000
31,000
Beginning balance
Changes
Ending balance
NCI
25%
5,125
(500)
4,625
Power
Corp. 75%
15,375
(1,500)
13,875
Buildings
and
Equipment
20,000
20,000
Goodwill
2,500
0
2,500
20,000
2,500
4,000
13,875
4,625
Investment in
Best Co.
Ending Balance
1,500
500
30,000
Income from
Best Co.
96,375
27,000
15,000
1,500
Acc.
Depr.
(2,000)
(2,000)
(4,000)
2,000
Beginning Balance
75% Net Income
75% Dividends
Excess Val. Amort.
Basic
13,875
Excess Reclass.
25,500
Ending Balance
1,500
106,875
93,000
27,000
27,000
1,500
0
5-72
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-36 (continued)
b.
Power
Corp.
Income Statement
Sales
Less: COGS
Less: Wage Expense
Less: Depreciation Expense
Less: Interest Expense
Less: Other Expenses
Income from Best Co.
Consolidated Net Income
NCI in Net Income
Controlling Interest in Net Income
Best Co.
Elimination Entries
DR
CR
290,000
(145,000)
(35,000)
(25,000)
(12,000)
(23,000)
25,500
75,500
200,000
(114,000)
(20,000)
(10,000)
(4,000)
(16,000)
75,500
36,000
126,875
75,500
(30,000)
172,375
48,000
36,000
(20,000)
64,000
68,500
85,000
97,000
50,000
350,000
(170,000)
106,875
32,000
14,000
24,000
25,000
150,000
(50,000)
20,000
30,000
587,375
195,000
2,500
52,500
Accounts Payable
Wages Payable
Notes Payable
Common Stock
Retained Earnings
NCI in NA of Best Co.
51,000
14,000
150,000
200,000
172,375
15,000
6,000
50,000
60,000
64,000
60,000
86,000
587,375
195,000
146,000
36,000
5-73
1,500
1,500
500
2,000
490,000
(259,000)
(55,000)
(37,000)
(16,000)
(39,000)
0
84,000
(8,500)
75,500
2,000
20,000
22,000
126,875
75,500
(30,000)
172,375
2,000
27,000
29,000
9,000
38,000
48,000
38,000
86,000
Consolidated
30,000
4,000
93,000
13,875
140,875
22,000
31,000
4,625
57,625
100,500
99,000
121,000
75,000
490,000
(194,000)
0
2,500
694,000
66,000
20,000
200,000
200,000
172,375
35,625
694,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-36 (continued)
c.
Cash
Accounts Receivable
Inventory
Land
Buildings and Equipment
Less: Accumulated Depreciation
Goodwill
Total Assets
$100,500
99,000
121,000
75,000
$480,000
(184,000)
Accounts Payable
Wages Payable
Notes Payable
Stockholders Equity:
Controlling Interest:
Common Stock
Retained Earnings
Total Controlling Interest
Noncontrolling Interest
Total Stockholders Equity
Total Liabilities and Stockholders' Equity
296,000
2,500
$694,000
$ 66,000
20,000
200,000
$200,000
172,375
$372,375
35,625
408,000
$694,000
$490,000
$259,000
55,000
37,000
16,000
39,000
(406,000)
$ 84,000
(8,500)
$ 75,500
5-74
$126,875
75,500
$202,375
(30,000)
$172,375
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
24,000
24,000
Record Master Corp.'s 80% share of Stanley Wood Co.'s 20X5 income
Cash
8,000
Investment in Stanley Wood Co.
Record Master Corp.'s 80% share of Stanley Wood Co.'s 20X5
dividend
Income from Stanley Wood Co.
Investment in Stanley Wood Co.
8,000
4,000
4,000
Master Corp.
80%
Common
Stock
Retained
Earnings
38,000
6,000
(2,000)
152,000
24,000
(8,000)
100,000
90,000
30,000
(10,000)
42,000
168,000
100,000
110,000
5-75
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
1/1/X5
12/31/X5
Goodwill = 0
Goodwill = 0
Identifiable excess
= 24,000
Excess = 20,000
80%
Book value =
152,000
$176,000
Net
investment in
Stanley
Wood Co.
$188,000
Net
investment in
Stanley
Wood Co.
80%
Book value =
168,000
P5-37 (continued)
Basic elimination entry
Common stock
Retained earnings
Income from Stanley Wood Co.
NCI in NI of Stanley Wood Co.
Dividends declared
Investment in Stanley Wood Co.
NCI in NA of Stanley Wood Co.
100,000
90,000
24,000
6,000
10,000
168,000
42,000
5-76
Buildings &
Equipment
50,000
50,000
5,000
4,000
1,000
50,000
25,000
20,000
5,000
Acc. Depr.
(20,000)
(5,000)
(25,000)
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
10,000
10,000
Investment in
Stanley Wood Co.
Beginning
Balance
80% Net Income
Income from
Stanley Wood Co.
176,000
24,000
8,000
4,000
Ending Balance
80% Dividends
Excess Val. Amort.
Basic
20,000
Excess Reclass.
20,000
Ending Balance
4,000
188,000
168,000
24,000
24,000
4,000
P5-37 (continued)
c.
Master
Corp.
Stanley
Wood
Co.
Elimination Entries
DR
CR
Consolidated
Income Statement
Sales
200,000
100,000
300,000
(120,000)
(50,000)
(170,000)
(25,000)
(15,000)
(15,000)
(5,000)
Less: COGS
20,000
60,000
30,000
5,000
(45,000)
(20,000)
24,000
4,000
29,000
4,000
65,000
6,000
1,000
(5,000)
5,000
60,000
60,000
30,000
35,000
314,000
90,000
90,000
60,000
30,000
35,000
(30,000)
(10,000)
Ending Balance
344,000
110,000
5-77
125,000
314,000
5,000
60,000
10,000
(30,000)
15,000
344,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
Balance Sheet
Cash and Receivables
Inventory
Land
81,000
65,000
260,000
90,000
80,000
80,000
500,000
150,000
(205,000)
(105,000)
188,000
10,000
136,000
350,000
160,000
50,000
700,000
25,000
(335,000)
168,000
20,000
Total Assets
Accounts Payable
904,000
280,000
50,000
60,000
20,000
10,000
Notes Payable
200,000
50,000
Common Stock
300,000
100,000
100,000
Retained Earnings
344,000
110,000
125,000
223,000
1,011,000
70,000
250,000
300,000
15,000
344,000
42,000
47,000
5,000
Total Liabilities & Equity
904,000
280,000
5-78
235,000
62,000
1,011,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
173,000
173,000
48,000
48,000
16,000
16,000
3,000
3,000
Mortar
Corp.
80%
Common
Stock
Retained
Earnings
30,000
12,000
(4,000)
120,000
48,000
(16,000)
50,000
100,000
60,000
(20,000)
38,000
152,000
50,000
140,000
5-79
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
1/1/X7
12/31/X7
Goodwill = 20,000
Goodwill = 20,000
Identifiable excess
= 33,000
Excess = 30,000
$202,000
Net
investment in
Granite Co.
$173,000
Initial
investment in
Granite Co.
80%
Book value =
152,000
80%
Book value =
120,000
P5-38 (continued)
Basic elimination entry
Common stock
Retained earnings
Income from Granite Co.
NCI in NI of Granite Co.
Dividends declared
Investment in Granite Co.
NCI in NA of Granite Co.
50,000
100,000
48,000
12,000
20,000
152,000
38,000
Buildings &
Equipment
41,250
41,250
5-80
3,750
3,000
750
41,250
25,000
3,750
50,000
12,500
Acc.
Depr.
0
(3,750)
(3,750)
Goodwil
l
25,000
0
25,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
16,000
16,000
Acquisition Price
80% Net Income
Ending Balance
Investment in
Granite Co.
173,000
48,000
16,000
3,000
202,000
152,000
50,000
0
60,000
Income from
Granite Co.
80% Dividends
Excess Val. Amort.
Basic
Excess Reclass.
48,000
45,000
Ending Balance
3,000
48,000
3,000
0
P5-38 (continued)
c.
Income Statement
Sales
Less: COGS
Less: Depreciation Expense
Less: Other Expenses
Income from Granite Co.
Consolidated Net Income
NCI in Net Income
Controlling Interest in Net
Income
Statement of Retained Earnings
Beginning Balance
Net Income
Less: Dividends Declared
Ending Balance
Balance Sheet
Cash
Accounts Receivable
Inventory
Land
Buildings & Equipment
Less: Accumulated Depreciation
Investment in Granite Co.
Mortar
Corp.
Granite
Co.
700,000
(500,000)
(25,000)
(75,000)
45,000
145,000
400,000
(250,000)
(15,000)
(75,000)
60,000
48,000
51,750
12,000
3,000
3,000
750
1,100,000
(750,000)
(43,750)
(150,000)
0
156,250
(11,250)
145,000
60,000
63,750
3,750
145,000
290,000
145,000
(50,000)
385,000
100,000
60,000
(20,000)
140,000
100,000
63,750
3,750
20,000
23,750
290,000
145,000
(50,000)
385,000
38,000
50,000
240,000
80,000
500,000
(155,000)
202,000
25,000
55,000
100,000
20,000
150,000
(75,000)
5-81
Elimination Entries
DR
CR
3,750
163,750
16,000
41,250
60,000
60,000
3,750
152,000
Consolidated
63,000
89,000
340,000
100,000
631,250
(173,750)
0
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
50,000
Goodwill
Total Assets
25,000
126,250
955,000
275,000
Accounts Payable
Mortgage Payable
Common Stock
Retained Earnings
NCI in NA of Granite Co.
70,000
200,000
300,000
385,000
35,000
50,000
50,000
140,000
50,000
163,750
955,000
275,000
229,750
281,750
16,000
23,750
38,000
12,500
74,250
36,000
20,000
Cash
Investment in Granite Co.
20,000
11,800
11,800
b.
Book Value Calculations:
NCI
20%
Mortar Corp.
80%
Common
Stock
Retained
Earnings
38,000
9,000
(5,000)
152,000
36,000
(20,000)
50,000
140,000
45,000
(25,000)
42,000
168,000
50,000
160,000
5-82
25,000
1,074,500
89,000
250,000
300,000
385,000
50,500
1,074,500
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
1/1/X8
12/31/X8
Goodwill = 20,000
Goodwill = 11,200
Identifiable excess
= 30,000
Excess = 27,000
$206,200
Net
investment in
Granite Co.
$202,000
Net
investment in
Granite Co.
80%
Book value =
168,000
80%
Book value =
152,000
P5-39 (continued)
Basic elimination entry
Common stock
Retained earnings
Income from Granite Co.
NCI in NI of Granite Co.
Dividends declared
Investment in Granite Co.
NCI in NA of Granite Co.
Excess Value (Differential) Calculations:
Mortar
Corp.
NCI
20%
+
80%
Beginning balance 12,500
50,000
Changes
(2,950)
(11,800)
Ending balance
9,550
38,200
50,000
140,000
36,000
9,000
25,000
168,000
42,000
Buildings
&
Equipment
41,250
41,250
5-83
Acc.
Depr.
(3,750)
(3,750)
(7,500)
3,750
11,000
11,800
2,950
41,250
14,000
7,500
38,200
9,550
Goodwill
25,000
(11,000)
14,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
9,000
9,000
Income from
Granite Co.
202,000
36,000
20,000
Ending Balance
11,800
80% Dividends
Excess Val.
Amort.
168,000
38,200
Basic
Excess Reclass.
36,000
24,200
Ending Balance
11,800
206,200
36,000
11,800
0
P5-39 (continued)
c.
Income Statement
Sales
Less: COGS
Less: Depreciation Expense
Less: Other Expenses
Less: Goodwill Impairment
Income from Granite Co.
Consolidated Net Income
NCI in Net Income
Controlling Interest in Net
Income
Statement of Retained
Earnings
Beginning Balance
Net Income
Less: Dividends Declared
Ending Balance
Mortar
Corp.
Granite
Co.
650,000
(490,000)
(25,000)
(62,000)
470,000
(310,000)
(15,000)
(100,000)
Elimination Entries
DR
CR
Consolidated
11,000
36,000
50,750
9,000
11,800
11,800
2,950
1,120,000
(800,000)
(43,750)
(162,000)
(11,000)
0
103,250
(6,050)
45,000
59,750
14,750
97,200
140,000
45,000
(25,000)
160,000
140,000
59,750
14,750
25,000
39,750
385,000
97,200
(45,000)
437,200
24,200
97,200
45,000
97,200
385,000
97,200
(45,000)
437,200
5-84
3,750
199,750
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
Balance Sheet
Cash
Accounts Receivable
Inventory
Land
Buildings & Equipment
Less: Accumulated Depreciation
Investment in Granite Co.
59,000
83,000
275,000
80,000
500,000
(180,000)
206,200
31,000
71,000
118,000
30,000
150,000
(90,000)
41,250
60,000
Goodwill
Total Assets
1,023,200
310,000
14,000
115,250
86,000
200,000
300,000
437,200
30,000
70,000
50,000
160,000
50,000
199,750
1,023,200
310,000
258,750
Accounts Payable
Mortgage Payable
Common Stock
Retained Earnings
NCI in NA of Granite Co.
Total Liabilities & Equity
9,000
60,000
7,500
168,000
38,200
282,700
9,000
39,750
42,000
9,550
91,300
96,000
96,000
15,000
15,000
9,000
9,000
6,000
6,000
5-85
90,000
145,000
393,000
110,000
631,250
(217,500)
0
14,000
1,165,750
107,000
270,000
300,000
437,200
51,550
1,165,750
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
Amber Corp.
60%
Common
Stock
Retained
Earnings
64,000
10,000
(6,000)
96,000
15,000
(9,000)
100,000
60,000
25,000
(15,000)
68,000
102,000
100,000
70,000
1/1/X8
12/31/X8
Goodwill = 0
Goodwill = 0
Identifiable excess
=0
Excess = 0
$96,000
Initial
investment in
Sparta Co.
60%
Book value =
96,000
5-86
$108,000
Net
investment in
Sparta Co.
60%
Book value =
108,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-40 (continued)
Basic elimination entry
Common stock
Retained earnings
Income from Sparta Co.
NCI in NI of Sparta Co.
Dividends declared
Investment in Sparta Co.
NCI in NA of Sparta Co.
100,000
60,000
15,000
10,000
15,000
102,000
68,000
6,000
4,000
6,000
4,000
75,000
75,000
Investment in
Sparta Co.
Acquisition Price
60% Net Income
96,000
15,000
9,000
6,000
Ending Balance
Income from
Sparta Co.
60% Net Income
15,000
Ending Balance
60% Dividends
OCI Entry
108,000
102,000
6,000
15,000
Basic
OCI
15,000
0
5-87
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-40 (continued)
b.
Income Statement
Sales
Less: COGS
Less: Depreciation Expense
Less: Interest Expense
Income from Sparta Co.
Consolidated Net Income
NCI in Net Income
Controlling Interest in Net Income
Statement of Retained Earnings
Beginning Balance
Net Income
Less: Dividends Declared
Ending Balance
Balance Sheet
Cash
Accounts Receivable
Inventory
Buildings & Equipment
Less: Accumulated Depreciation
Investment in Row Company
Investment in Sparta Co.
Amber
Corp.
Sparta
Co.
220,000
(150,000)
(30,000)
(8,000)
15,000
47,000
148,000
(110,000)
(10,000)
(3,000)
47,000
25,000
208,000
47,000
(24,000)
231,000
60,000
25,000
(15,000)
70,000
27,000
65,000
40,000
500,000
(140,000)
8,000
22,000
30,000
235,000
(85,000)
40,000
25,000
15,000
15,000
10,000
25,000
60,000
25,000
85,000
600,000
250,000
Accounts Payable
Bonds Payable
Common Stock
Retained Earnings
Accumulated OCI
NCI in NA of Sparta Co.
63,000
100,000
200,000
231,000
6,000
20,000
50,000
100,000
70,000
10,000
600,000
250,000
0
15,000
15,000
208,000
47,000
(24,000)
231,000
75,000
75,000
100,000
85,000
10,000
195,000
Consolidated
368,000
(260,000)
(40,000)
(11,000)
0
57,000
(10,000)
47,000
75,000
108,000
Total Assets
Elimination Entries
DR
CR
102,000
6,000
183,000
15,000
68,000
4,000
87,000
35,000
87,000
70,000
660,000
(150,000)
40,000
0
742,000
83,000
150,000
200,000
231,000
6,000
72,000
742,000
0
6,000
6,000
0
10,000
(4,000)
10,000
4,000
6,000
5-88
10,000
10,000
6,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-40 (continued)
c.
Cash
Accounts Receivable
Inventory
Buildings and Equipment
Less: Accumulated Depreciation
Investment in Marketable Securities
Total Assets
$ 35,000
87,000
70,000
$660,000
(150,000)
Accounts Payable
Bonds Payable
Stockholders Equity:
Controlling Interest:
Common Stock
Retained Earnings
Accumulated Other Comprehensive Income
Total Controlling Interest
Noncontrolling Interest
Total Stockholders Equity
Total Liabilities and Stockholders' Equity
510,000
40,000
$742,000
$ 83,000
150,000
$200,000
231,000
6,000
$437,000
72,000
509,000
$742,000
$368,000
$260,000
40,000
11,000
(311,000)
$ 57,000
(10,000)
$ 47,000
5-89
$57,000
10,000
$67,000
(14,000)
$53,000
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
108,000
108,000
18,000
18,000
12,000
12,000
2,400
2,400
Amber Corp.
60%
Common
Stock
Retained
Earnings
OCI
72,000
12,000
(8,000)
108,000
18,000
(12,000)
100,000
70,000
30,000
(20,000)
10,000
76,000
114,000
100,000
80,000
10,000
5-90
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
1/1/X9
12/31/X9
Goodwill = 0
Goodwill = 0
Excess = 0
Excess = 0
$116,400
Net
investment in
Sparta Co.
$108,000
Net
investment in
Sparta Co.
60%
Book value =
116,400
60%
Book value =
108,000
P5-41(continued)
Basic elimination entry
Common stock
Retained earnings
Accumulated OCI
Income from Sparta Co.
NCI in NI of Sparta Co.
Dividends declared
Investment in Sparta Co.
NCI in NA of Sparta Co.
100,000
70,000
10,000
18,000
12,000
20,000
114,000
76,000
2,400
1,600
2,400
1,600
75,000
75,000
5-91
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
Investment in
Sparta Co.
Beginning Balance
60% Net Income
Income from
Sparta Co.
108,000
18,000
12,000
60% Dividends
OCI Entry
114,000
2,400
Basic
OCI
2,400
Ending Balance
116,400
18,000
18,000
Ending Balance
18,000
P5-41 (continued)
b.
Income Statement
Sales
Less: COGS
Less: Depreciation Expense
Less: Interest Expense
Income from Sparta Co.
Consolidated Net Income
NCI in Net Income
Controlling Interest in Net
Income
Statement of Retained Earnings
Beginning Balance
Net Income
Less: Dividends Declared
Ending Balance
Balance Sheet
Cash
Accounts Receivable
Inventory
Buildings & Equipment
Less: Accumulated Depreciation
Investment in Row Company
Investment in Sparta Co.
Amber
Corp.
Sparta
Co.
250,000
(170,000)
(30,000)
(8,000)
18,000
60,000
140,000
(97,000)
(10,000)
(3,000)
30,000
18,000
18,000
12,000
60,000
30,000
30,000
231,000
60,000
(40,000)
251,000
70,000
30,000
(20,000)
80,000
70,000
30,000
18,000
45,000
40,000
585,000
(170,000)
11,000
21,000
30,000
257,000
(95,000)
44,000
116,400
5-92
Elimination Entries
DR
CR
100,000
Consolidated
390,000
(267,000)
(40,000)
(11,000)
0
72,000
(12,000)
0
60,000
0
20,000
20,000
231,000
60,000
(40,000)
251,000
75,000
75,000
114,000
29,000
66,000
70,000
767,000
(190,000)
44,000
0
Chapter 05 - Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
634,400
268,000
Accounts Payable
Bonds Payable
Common Stock
Retained Earnings
Accumulated OCI
NCI in NA of Sparta Co.
75,000
100,000
200,000
251,000
8,400
24,000
50,000
100,000
80,000
14,000
634,400
268,000
214,000
6,000
10,000
10,000
6,000
2,400
0
4,000
(1,600)
2,400
75,000
2,400
191,400
Total Assets
100,000
100,000
14,000
20,000
76,000
1,600
97,600
4,000
1,600
8,400
5-93
14,000
14,000
786,000
99,000
150,000
200,000
251,000
8,400
77,600
786,000
8,400