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 5, Problem 5.14E
a
To determine
Introduction: The consolidation procedure used in the second year and the subsequent year is similar to that of the first. The equity method is used to evaluate the investment in the subsidiary. In order to determine consolidation entries, the change in the parent’s investment in the second or subsequent year is determined. Any differential arising is recognized and all the intercompany transactions are eliminated.
The Consolidation entries required for December 31, 20X4
a
Expert Solution
Explanation of Solution
Elimination entries
| Particulars | Debit $ | Credit $ |
| Investment in S company | 28,000 | |
| Income from S company | 28,000 | |
| (Income assigned to controlling interest) | ||
| Cash | 12,000 | |
| Investment in S company | 12,000 | |
| (Cash received on account of share of dividends from Subsidiary S) | ||
| Common stock | 100,000 | |
| 70,000 | ||
| Income from S company | 28,000 | |
| Non-controlling interest in net income of S | 7,000 | |
| Dividends declared | 15,000 | |
| Investment in S Company | 152,000 | |
| Non-controlling interest in net asset of S | 38,000 | |
| (Investment in S eliminated by reversal) | ||
| 60,000 | ||
| Depreciable assets | 60,000 | |
| (Depreciation on assets recognized) |
- Parents’ share of income from subsidiary recognized.
- Share of dividends from subsidiary recognized
- Elimination of beginning investment in S
Income from subsidiary given $28,000
b
To determine
Introduction: The consolidation procedure used in the second year and the subsequent year is similar to that of the first. The equity method is used to evaluate the investment in the subsidiary. In order to determine consolidation entries, the change in the parent’s investment in the second or subsequent year is determined. Any differential arising is recognized and all the intercompany transactions are eliminated.
The consolidation worksheet needed at December 31, 20X4.
b
Expert Solution
Answer to Problem 5.14E
Retained earnings and net assets total as per consolidation worksheet $317,000 and $895,000
Explanation of Solution
P and S
Consolidation work sheet
For the year ended December 31, 20X3
| Elimination | |||||
| P $ | S $ | Debit $ | Credit $ | Consolidated $ | |
| Income statement | |||||
| Sales | 230,000 | 140,000 | 370,000 | ||
| Less: | (25,000) | (15,000) | (40,000) | ||
| Other expenses | (105,000) | (90,000) | (240,000) | ||
| Income from S | 28,000 | 28,000 | 0 | ||
| Consolidated net income | 83,000 | 35,000 | 28,000 | 90,000 | |
| Non-controlling interest in net income | 7,000 | (7,000) | |||
| Controlling interest in net income | 83,000 | 35,000 | 35,000 | 0 | 83,000 |
| Statement of retained earnings: | |||||
| Beginning balance | 284,000 | 70,000 | 70,000 | 284,000 | |
| Net income current year | 83,000 | 35,000 | 35,000 | 0 | 83,000 |
| Less: dividends | (50,000) | (15,000) | 15,000 | (50,000) | |
| Retained earnings ending | 317,000 | 90,000 | 105,000 | 15,000 | 317,000 |
| Balance sheet: | |||||
| Current assets | 235,000 | 150,000 | 385,000 | ||
| Assets | 500,000 | 300,000 | 60,000 | 740,000 | |
| Less: Accumulated depreciation | (200,000) | (90,000) | 60,000 | (230,000) | |
| Investment in S | 152,000 | 152,000 | |||
| Total assets | 687,000 | 360,000 | 60,000 | 212,000 | 895,000 |
| Current liabilities | 70,000 | 50,000 | 120,000 | ||
| Long term debts | 100,000 | 120,000 | 220,000 | ||
| Common stock | 200,000 | 100,000 | 100,000 | 200,000 | |
| Retained earnings | 317,000 | 90,000 | 105,000 | 15,000 | 317,000 |
| Non-controlling interest in net assets of S | 38,000 | 38,000 | |||
| Total liabilities & equity | 687,000 | 360,000 | 205,000 | 53,000 | 895,000 |
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Chapter 5 Solutions
Advanced Financial Accounting
Ch. 5 - Where is the balance assigned to the...Ch. 5 - Why must a noncontrolling interest be reported in...Ch. 5 - Prob. 5.3QCh. 5 - Prob. 5.4QCh. 5 - Prob. 5.5QCh. 5 - Prob. 5.6QCh. 5 - Prob. 5.7QCh. 5 - Prob. 5.8QCh. 5 - Prob. 5.9QCh. 5 - Prob. 5.10Q
Ch. 5 - Under what Circumstances would a parent company...Ch. 5 - Prob. 5.12QCh. 5 - Prob. 5.13QCh. 5 - Prob. 5.14AQCh. 5 - Prob. 5.15AQCh. 5 - Consolidation Worksheet Preparation The newest...Ch. 5 - Prob. 5.2CCh. 5 - Prob. 5.3CCh. 5 - Prob. 5.4CCh. 5 - Prob. 5.5CCh. 5 - Prob. 5.1.1ECh. 5 - Prob. 5.1.2ECh. 5 - Prob. 5.1.3ECh. 5 - Prob. 5.1.4ECh. 5 - Prob. 5.2.1ECh. 5 - Prob. 5.2.2ECh. 5 - Prob. 5.2.3ECh. 5 - Prob. 5.2.4ECh. 5 - Prob. 5.2.5ECh. 5 - Prob. 5.3ECh. 5 - Prob. 5.4ECh. 5 - Balance Sheet Worksheet Problem Company owns 90...Ch. 5 - Prob. 5.6ECh. 5 - Prob. 5.7ECh. 5 - Prob. 5.8.1ECh. 5 - Prob. 5.8.2ECh. 5 - Prob. 5.8.3ECh. 5 - Prob. 5.8.4ECh. 5 - Prob. 5.8.5ECh. 5 - Prob. 5.8.6ECh. 5 - Prob. 5.8.7ECh. 5 - Prob. 5.9ECh. 5 - Prob. 5.10ECh. 5 - Prob. 5.11ECh. 5 - Prob. 5.12ECh. 5 - Prob. 5.13ECh. 5 - Prob. 5.14ECh. 5 - Prob. 5.15ECh. 5 - Prob. 5.16ECh. 5 - Prob. 5.17AECh. 5 - Prob. 5.18AECh. 5 - Prob. 5.19PCh. 5 - Prob. 5.20PCh. 5 - Prob. 5.21.1PCh. 5 - Multiple-Choice Questions on Applying the Equity...Ch. 5 - Prob. 5.21.3PCh. 5 - Prob. 5.21.4PCh. 5 - Prob. 5.22PCh. 5 - Computation of Account Balances Pencil Company...Ch. 5 - Prob. 5.24PCh. 5 - Equity Entries with Differential On January 1,...Ch. 5 - Equity Entries with Differential Plug Corporation...Ch. 5 - Prob. 5.27PCh. 5 - Prob. 5.28PCh. 5 - Prob. 5.29P
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