Chapter05ConsolidationofLessThanWhollyOwnedSubsidiaries

SolutiontoChapter5 E51,4,5,13
E5-1 Multiple-Choice Questions on Consolidation Process 1. d 2. d 3. b 4. d [AICPA Adapted]

E5-4 Computation of Consolidated Balances a. b. c. d. Inventory Land Buildings and Equipment Fair value of consideration given by Ford Fair value of noncontrolling interest Total fair value Book value of Slims net assets Fair value increment for: Inventory Land Buildings and equipment (net) Fair value of identifiable net assets Goodwill Investment in Slim Corporation: None would be reported; the balance in the investment account is eliminated. Noncontrolling Interest ($587,500 x .20) $117,500 $140,000 $ 60,000 $550,000 $470,000 117,500 $587,500

$450,000 20,000 (10,000) 70,000

(530,000) $ 57,500

e.

f.

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Chapter05ConsolidationofLessThanWhollyOwnedSubsidiaries

E5-5 Balance Sheet Workpaper Power Company and Pleasantdale Dairy Consolidated Balance Sheet Workpaper January 1, 20X7 PleasPower antdale Company Dairy 130,000 70,000 210,000 90,000 70,000 40,000 390,000 270,000 1,070,000 80,000 200,000 400,000 390,000 1,070,000 420,000 40,000 100,000 60,000 220,000 420,000 220,000 (1) 20,000 (3) 8,900 (1)270,000 (2) 20,000 Adjustments and Eliminations Debit Credit (a) 900 (3) 8,900 (2) 20,000 Consolidated 192,000 300,000 130,000 610,000

Item Cash and Receivables Inventory Land Buildings and Equipment (net) Investment in Pleasantdale Stock Differential Total Debits Current Payables Long-Term Liabilities Common Stock Power Company Pleasantdale Dairy Retained Earnings Noncontrolling Interest Total Credits

1,232,000 111,100 300,000 400,000

(1) 60,000 (1)220,000 329,800

(a) 900 (1) 30,000 329,800

390,900 30,000 1,232,000

Adjusting and eliminating entries: (a) Cash and Receivables Retained Earnings Accrue interest earned by Power Company. Common Stock Pleasantdale Dairy Retained Earnings Differential Investment in Pleasantdale Dairy Stock Noncontrolling Interest Eliminate investment balance. $20,000 = $270,000 + $30,000 - $280,000 Land Differential Assign differential. Current Payables Cash and Receivables Eliminate intercompany receivable/payable. 900 900

E(1)

60,000 220,000 20,000

270,000 30,000

E(2)

20,000

20,000

E(3)

8,900

8,900

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Chapter05ConsolidationofLessThanWhollyOwnedSubsidiaries

E5-13 Consolidation after One Year of Ownership a. Eliminating entries, January 1, 20X2: E(1) Common Stock Lowe Corporation Retained Earnings, January 1 Differential Investment in Lowe Corporation Stock Noncontrolling Interest Eliminate investment balance. Computation of differential Fair value of consideration given by Pioneer Fair value of noncontrolling interest Total fair value Underlying book value Differential E(2) Buildings Goodwill Differential Assign differential: $5,500 = $37,500 - $32,000 120,000 80,000 37,500

190,000 47,500

$190,000 47,500 237,500 (200,000) $ 37,500 32,000 5,500

37,500

b.

Eliminating entries, December 31, 20X2: E(1) Income from Subsidiary Investment in Lowe Corporation Stock Eliminate income from subsidiary. Computation of income from subsidiary Reported net income of Lowe Amortization of differential assigned to buildings ($32,000 / 8 years) Income after amortization of differential Proportion of stock acquired Income from subsidiary for 20X2 28,800 28,800

$40,000 (4,000) $36,000 x .80 $28,800

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Chapter05ConsolidationofLessThanWhollyOwnedSubsidiaries

E5-13 (continued) E(2) Income to Noncontrolling Interest Noncontrolling Interest Assign income to noncontrolling interest: $7,200 = ($40,000 - $4,000) x .20 Common Stock Lowe Corporation Retained Earnings, January 1 Differential Investment in Lowe Corporation Stock Noncontrolling Interest Eliminate beginning investment balance. Buildings Goodwill Differential Assign beginning differential. Depreciation Expense Accumulated Depreciation Amortize differential. 7,200 7,200

E(3)

120,000 80,000 37,500

190,000 47,500

E(4)

32,000 5,500

37,500

E(5)

4,000

4,000

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