Chapter 03 – The Reporting Entity and Consolidation of Less-Than-Wholly-Owned Subsidiaries with no Differential
3-39
P3–29 Consolidated Worksheet and Balance Sheet on the Acquisition Date (Equity
Method)
a.
Equity Method Entries on Paper Co.’s Books:
Investment in Scissor Co.
296,000
Cash
296,000
Record the initial investment in Scissor Co.
b.
Book Value Calculations:
NCI
20%
+
Paper
Co.
80%
=
Common
Stock
+
Retained
Earnings
Book value at
acquisition
74,000
296,000
250,000
120,000
Basic Consolidation Entry
Common stock
250,000
Retained earnings
120,000
Investment in Scissor Co.
296,000
NCI in NA of Scissor Co.
74,000
Optional accumulated depreciation consolidation entry
Accumulated depreciation
24,000
Building & equipment
24,000
Investment in
Scissor Co.
Acquisition Price
296,000
296,000
Basic Entry
0
Chapter 03 – The Reporting Entity and Consolidation of Less-Than-Wholly-Owned Subsidiaries with no Differential
3-40
P3–29 (continued)
Paper
Co.
Scissor
Co.
Consolidation
Entries
DR
CR
Consolidated
Balance Sheet
Cash
109,000
25,000
134,000
Accounts Receivable
65,000
37,000
102,000
Inventory
125,000
87,000
212,000
Investment in Scissor Co.
296,000
296,000
0
Land
280,000
125,000
405,000
Buildings & Equipment
875,000
250,000
24,000
1,101,000
Less: Accumulated Depreciation
(500,000)
(24,000)
24,000
(500,000)
Total Assets
1,250,000
500,000
24,000
320,000
1,454,000
Accounts Payable
95,000
30,000
125,000
Bonds Payable
250,000
100,000
350,000
Common Stock
625,000
250,000
250,000
625,000
Retained Earnings
280,000
120,000
120,000
280,000
NCI in NA of Scissor Co.
74,000
74,000
Total Liabilities & Equity
1,250,000
500,000
370,000
74,000
1,454,000
Paper Co.
Consolidated Balance Sheet
1/1/20X8
Cash
134,000
Accounts Receivable
102,000
Inventory
212,000
Land
405,000
Buildings & Equipment
1,101,000
Less: Accumulated Depreciation
(500,000)
Total Assets
1,454,000
Accounts Payable
125,000
Bonds Payable
350,000
Common Stock
625,000
Retained Earnings
280,000
NCI in NA of Scissor Co.
74,000
Total Liabilities & Equity
1,454,000
Chapter 03 – The Reporting Entity and Consolidation of Less-Than-Wholly-Owned Subsidiaries with no Differential
P3-30 Consolidated Worksheet at End of the First Year of Ownership (Equity Method)
a.
Equity Method Entries on Paper Co.’s Books:
Investment in Scissor Co.
296,000
Cash
296,000
Record the initial investment in Scissor Co.
Investment in Scissor Co.
74,400
Income from Scissor Co.
74,400
Record Paper Co.’s 80% share of Scissor Co.’s 20X9 income
Cash
20,000
Investment in Scissor Co.
20,000
Record Paper Co.’s 80% share of Scissor Co.’s 20X9 dividend
Book Value Calculations:
NCI
20%
+
Paper
Co.
80%
=
Common
Stock
+
Retained
Earnings
Beginning book
value
74,000
296,000
250,000
120,000
+ Net Income
18,600
74,400
93,000
– Dividends
(5,000)
(20,000)
(25,000)
Ending book value
87,600
350,400
250,000
188,000
Chapter 03 – The Reporting Entity and Consolidation of Less-Than-Wholly-Owned Subsidiaries with no Differential
3-42
P3-30 (continued)
Basic Consolidation Entry
Common stock
250,000
Retained earnings
120,000
Income from Scissor Co.
74,400
NCI in NI of Scissor Co.
18,600
Dividends declared
25,000
Investment in Scissor Co.
350,400
NCI in NA of Scissor Co.
87,600
Optional accumulated depreciation consolidation
entry
Accumulated depreciation
24,000
Building & equipment
24,000
Investment in
Income from
Scissor Co.
Scissor Co.
Acquisition Price
296,000
80% Net Income
74,400
74,400
80% Net Income
20,000
80%
Dividends
Ending Balance
350,400
74,400
Ending Balance
350,400
Basic
74,400
0
0
Chapter 03 – The Reporting Entity and Consolidation of Less-Than-Wholly-Owned Subsidiaries with no Differential
3-43
P3-30(continued)
Paper
Co.
Scissor
Co.
Consolidation
Entries
DR
CR
Consolidated
Income Statement
Sales
800,000
310,000
1,110,000
Less: COGS
(250,000)
(155,000)
(405,000)
Less: Depreciation Expense
(65,000)
(12,000)
(77,000)
Less: Other Expenses
(280,000)
(50,000)
(330,000)
Income from Scissor Co.
74,400
74,400
0
Consolidated Net Income
279,400
93,000
74,400
298,000
NCI in Net Income
18,600
(18,600)
Controlling Interest in Net
Income
279,400
93,000
93,000
0
279,400
Statement of Retained Earnings
Beginning Balance
280,000
120,000
120,000
280,000
Net Income
279,400
93,000
93,000
0
279,400
Less: Dividends Declared
(80,000)
(25,000)
25,000
(80,000)
Ending Balance
479,400
188,000
213,000
25,000
479,400
Balance Sheet
Cash
191,000
46,000
237,000
Accounts Receivable
140,000
60,000
200,000
Inventory
190,000
120,000
310,000
Investment in Scissor Co.
350,400
350,400
0
Land
250,000
125,000
375,000
Buildings & Equipment
875,000
250,000
24,000
1,101,000
Less: Accumulated Depreciation
(565,000)
(36,000)
24,000
(577,000)
Total Assets
1,431,400
565,000
24,000
374,400
1,646,000
Accounts Payable
77,000
27,000
104,000
Bonds Payable
250,000
100,000
350,000
Common Stock
625,000
250,000
250,000
625,000
Retained Earnings
479,400
188,000
213,000
25,000
479,400
NCI in NA of Scissor Co.
87,600
87,600
Total Liabilities & Equity
1,431,400
565,000
463,000
112,600
1,646,000
Chapter 03 – The Reporting Entity and Consolidation of Less-Than-Wholly-Owned Subsidiaries with no Differential
P3-31 Consolidated Worksheet at End of the Second Year of Ownership (Equity Method)
a.
Equity Method Entries on Paper Co.’s Books:
Investment in Scissor Co.
85,600
Income from Scissor Co.
85,600
Record Paper Co.’s 80% share of Scissor Co.’s 20X9 income
Cash
24,000
Investment in Scissor Co.
24,000
Record Paper Co.’s 80% share of Scissor Co.’s 20X9 dividend
Book Value Calculations:
NCI
20%
+
Paper
Co.
80%
=
Common
Stock
+
Retained
Earnings
Beginning book value
87,600
350,400
250,000
188,000
+ Net Income
21,400
85,600
107,000
– Dividends
(6,000)
(24,000)
(30,000)
Ending book value
103,000
412,000
250,000
265,000
Chapter 03 – The Reporting Entity and Consolidation of Less-Than-Wholly-Owned Subsidiaries with no Differential
3-45
P3-31 (continued)
Basic Consolidation Entry
Common stock
250,000
Retained earnings
188,000
Income from Scissor Co.
85,600
NCI in NI of Scissor Co.
21,400
Dividends declared
30,000
Investment in Scissor Co.
412,000
NCI in NA of Scissor Co.
103,000
Optional accumulated depreciation consolidation entry
Accumulated depreciation
24,000
Building & equipment
24,000
Investment in
Income from
Scissor Co.
Scissor Co.
Beginning Balance
350,400
80% Net Income
85,600
85,600
80% Net Income
24,000
80% Dividends
Ending Balance
412,000
85,600
Ending Balance
412,000
Basic
85,600
0
0
Chapter 03 – The Reporting Entity and Consolidation of Less-Than-Wholly-Owned Subsidiaries with no Differential
3-46
P3-31 (continued)
Paper
Co.
Scissor
Co.
Consolidation
Entries
DR
CR
Consolidated
Income Statement
Sales
880,000
355,000
1,235,000
Less: COGS
(278,000)
(178,000)
(456,000)
Less: Depreciation Expense
(65,000)
(12,000)
(77,000)
Less: Other Expenses
(312,000)
(58,000)
(370,000)
Income from Scissor Co.
85,600
85,600
0
Consolidated Net Income
310,600
107,000
85,600
332,000
NCI in Net Income
21,400
(21,400)
Controlling Interest in Net
Income
310,600
107,000
107,000
0
310,600
Statement of Retained Earnings
Beginning Balance
479,400
188,000
188,000
479,400
Net Income
310,600
107,000
107,000
0
310,600
Less: Dividends Declared
(90,000)
(30,000)
30,000
(90,000)
Ending Balance
700,000
265,000
295,000
30,000
700,000
Balance Sheet
Cash
295,000
116,000
411,000
Accounts Receivable
165,000
97,000
262,000
Inventory
193,000
115,000
308,000
Investment in Scissor Co.
412,000
412,000
0
Land
250,000
125,000
375,000
Buildings & Equipment
875,000
250,000
24,000
1,101,000
Less: Accumulated Depreciation
(630,000)
(48,000)
24,000
(654,000)
Total Assets
1,560,000
655,000
24,000
436,000
1,803,000
Accounts Payable
85,000
40,000
125,000
Bonds Payable
150,000
100,000
250,000
Common Stock
625,000
250,000
250,000
625,000
Retained Earnings
700,000
265,000
295,000
30,000
700,000
NCI in NA of Scissor Co.
103,000
103,000
Total Liabilities & Equity
1,560,000
655,000
545,000
133,000
1,803,000