Concept explainers
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
Subsidiary preferred stock outstanding: many companies have more than one type of outstanding stock, each type of security serves 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 elimination entries needed to prepare consolidated financial statement for C Corporation for December 31, 20X6.
Want to see the full answer?
Check out a sample textbook solutionChapter 9 Solutions
Advanced Financial Accounting
- 2. At 1 January 20X6 Steller acquired 75% of the share capital of Nebula for $750,000. At that date the share capital of Nebula consisted of 20,000 ordinary shares of $1 each and its reserves were $10,000. The fair value of the non-controlling interest was valued at $150,000 at 31 December 20X8. In the consolidated statement of financial position of Steller and its subsidiary Nebula at 31 December 20X8, what amount should appear for goodwill?arrow_forwardOn July 1, 20X1, Pushway Corporation issued 100,000 shares of common stock in exchange for all of Stroker Company’s common stock. The Pushway stock issued had a market value of $500,000 on the date of the exchange. Following are the July 1, 20X1, pre-acquisition balance sheets of Pushway and Stroker, plus fair value information for Stroker’s assets and liabilities. Stroker Pushway Book Value Fair Value Assets Current assets $ 300,000 $ 100,000 $ 100,000 Long-term assets 600,000 400,000 470,000 Total assets $ 900,000 $ 500,000 $ 570,000 Liabilities Current liabilities $ 200,000 $ 50,000 $ 50,000 Long-term liabilities 250,000 100,000 120,000 Total liabilities 450,000 150,000 $ 170,000 Stockholders' equity Common stock 300,000 250,000 Retained earnings 150,000 100,000 Total stockholders' equity 450,000 350,000…arrow_forwardOn July 1, 20X1, Pushway Corporation issued 100,000 shares of common stock in exchange for all of Stroker Company’s common stock. The Pushway stock issued had a market value of $500,000 on the date of the exchange. Following are the July 1, 20X1, pre-acquisition balance sheets of Pushway and Stroker, plus fair value information for Stroker’s assets and liabilities. Stroker Pushway Book Value Fair Value Assets Current assets $ 300,000 $ 100,000 $ 100,000 Long-term assets 600,000 400,000 470,000 Total assets $ 900,000 $ 500,000 $ 570,000 Liabilities Current liabilities $ 200,000 $ 50,000 $ 50,000 Long-term liabilities 250,000 100,000 120,000 Total liabilities 450,000 150,000 $ 170,000 Stockholders' equity Common stock 300,000 250,000 Retained earnings 150,000 100,000 Total stockholders' equity 450,000 350,000…arrow_forward
- Beta Company acquired 100% of the voting common shares of Standard Video Corporation, by issuing bonds with a par value and fair value of $150,000. Immediately prior to the acquisition, Beta reported total assets of $500,000, liabilities of $280,000, and stockholders' equity of $220,000. At that date, Standard Video reported total assets of $400,000, liabilities of $250,000, and stockholders' equity of $150,000 Based on the preceding information, what amount of stockholders' equity was reported in the consolidated balance sheet immediately after acquisition? Select one: a. 350,000 b. 220,000 c. 370,000 d. 150,000arrow_forwardPeel Corporation purchased 60 percent of Split Products Company's shares on December 31, 20X7, for $216,000. At that date, the fair value of the noncontrolling interest was $144,000. On January 1, 20X9, Peel purchased an additional 20 percent of Split's common stock for $97,000. Summarized balance sheets for Split on the dates indicated are as follows: Assets Cash Accounts Receivable Inventory Buildings & Equipment (net) Total Assets Liabilities & Equities Accounts Payable Bonds Payable Common Stock Retained Earnings Total Liabilities & Equities 20X7 $ 49,000 51,000 72,000 370,000 $542,000 December 31 20X8 Balance in investment account $ 79,000 91,000 102,000 350,000 $622,000 20X9 $ 99,000 121,000 162,000 330,000 $712,000 $ 77,000 $127,000 $167,000 105,000 105,000 105,000 155,000 155,000 155,000 205,000 235,000 285,000 $542,000 $622,000 $712,000 Split paid dividends of $22,000 in each of the three years. Peel uses the equity method in accounting for its investment in Split and…arrow_forwardOn January 1, 20X7, Phillips Corporation acquired 35 percent of the outstanding shares of Shell Corporation for $100,000 cash. Shell Company reported net income of $175,000 and paid dividends of $25,000 for both 20X7 and 20X8. The fair value of shares held by Phillips was $310,000 and $325,000 on December 31, 20X7 and 20X8 respectively.Based on the preceding information, what amount will be reported by Phillips as its basis in the Shell investment for 20X7, if it used the equity method of accounting? Group of answer choices $122,500 $161,250 $100,000 $152,500arrow_forward
- On 1 January 20XO Alpha Co purchased 90,000 ordinary $1 shares in Beta Co for $270,000. At that date Beta Co's retained earnings amounted to $90,000 and the fair values of Beta Co's assets at acquisition were equal to their book values. Three years later, on 31 December 20X2, the statements of financial position of the two companies were: Alpha Co Beta Co Sundry net assets Shares in Beta 230,000 180,000 410,000 260,000 260,000 Share capital Ordinary shares of $1 each Retained earnings 200,000 100,000 210,000 410,000 160,000 260,000 The share capital of Beta Co has remained unchanged since 1 January 20X0. The fair value of the non- controlling interest at acquisition was $42,000. Required: a. What amount should appear in the group's consolidated statement of financial position at 31 December 20X2 for goodwill? b. What amount should appear in the group's consolidated statement of financial position at 31 December 20X2 for non-controlling interest? c. What amount should appear in the…arrow_forwardPeanut Company acquired 75 percent of Snoopy Company's stock at underlying book value on January 1, 20X8. At that date, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Snoopy Company. Snoopy Company reported shares outstanding of $350,000 and retained earnings of $100,000. During 20X8, Snoopy Company reported net income of $60,000 and paid dividends of $3,000. In 20X9, Snoopy Company reported net income of $90,000 and paid dividends of $15,000. The following transactions occurred between Peanut Company and Snoopy Company in 20X8 and 20X9:Snoopy Co. sold equipment to Peanut Co. for a $42,000 gain on December 31, 20X8. Snoopy Co. had originally purchased the equipment for $140,000 and it had a carrying value of $28,000 on December 31, 20X8. At the time of the purchase, Peanut Co. estimated that the equipment still had a seven-year remaining useful life.Peanut sold land costing $90,000 to Snoopy Company on June 28, 20X9, for…arrow_forwardPizza Corporation purchased 100 percent of the common stock of Slice Corporation on January 1, 20X2, by issuing 49,000 shares of its $6 par value common stock. The market price of Pizza’s shares at the date of issue was $26. Slice reported net assets with a book value of $1,197,000 on that date. The amount paid in excess of the book value of Slice’s net assets was attributed to the increased value of patents held by Slice with a remaining useful life of 7 years. Slice reported net income of $69,000, paid dividends of $24,000 in 20X2, reported a net loss of $57,000, and paid dividends of $14,000 in 20X3. Required: Assuming that Pizza Corporation uses the equity method in accounting for its investment in Slice Corporation, prepare all journal entries for Pizza for 20X2 and 20X3.arrow_forward
- On 1 January 20X0 Alpha Co purchased 90,000 ordinary $1 shares in Beta Co for $270,000. At that date Beta Co's retained earnings amounted to $90,000 and the fair values of Beta Co's assets at acquisition were equal to their book values. Three years later, on 31 December 20X2, the statements of financial position of the two companies were: Alpha Co Beta Co $ $ Sundry net assets 230,000 260,000 Shares in Beto 180,000 - Share capital Ordinary shares of $1 each 200,000…arrow_forwardOn 1 January 20X0 Alpha Co purchased 90,000 ordinary $1 shares in Beta Co for $270,000. At that date Beta Co's retained earnings amounted to $90,000 and the fair values of Beta Co's assets at acquisition were equal to their book values. Three years later, on 31 December 20X2, the statements of financial position of the two companies were: Alpha Co Beta Co $ $ Sundry net assets 230,000 260,000 Shares in Beto 180,000 - Share capital Ordinary shares of $1 each 200,000…arrow_forwardOn January 1, 20X1, P Company (PC) purchased 80% of the outstanding shares of S Company (SC) at thecost of P700,000. On that date, SC had P300,000 and P500,000 capital stock and retained earnings,respectively. The non-controlling interest (NCI) is measured on a fair-value basis.For 20X1, PC had a comprehensive income (CI) of P300,000 and paid dividends of P100,000. On the otherhand, SC reported a CI of P150,000 and paid dividends of P50,000. All of the assets and liabilities of SCompany had book values that approximately equal to their respective market values.On December 31, 20X1, PC sold a piece of equipment with a book value of P30,000 to SC for P25,000.The gain on the sale is included in the CI of PC indicated above. The equipment has a 10-year useful life.It has been used for the past five (5) years before the date of acquisition. Required:a. Prepare the journal entries that both companies should make for the year 20X1.b. Allocate the consolidated comprehensive income at the end…arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education