Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-31
Excess Value (Differential) Reclassification entry:
Land
7,500
Equipment
40,000
Patent
10,500
Acc. Depr.
15,000
Investment in Conway Corp.
25,800
NCI in NA of Conway Corp.
17,200
E5-13 Consolidation Worksheet for Majority-Owned Subsidiary
a.
Equity Method Entries on Proud Corp.’s Books:
Investment in Stergis Co.
120,000
Cash
120,000
Record the initial investment in Stergis Co.
Investment in Stergis Co.
24,000
Income from Stergis Co.
24,000
Record Proud Corp.’s 80% share of Stergis Co.’s 20X3 income
Cash
8,000
Investment in Stergis Co.
8,000
Record Proud Corp.’s 80% share of Stergis Co.’s 20X3 dividend
Book Value Calculations:
NCI
20%
+
Proud Corp.
80%
=
Common
Stock
+
Retained
Earnings
Beginning book
value
30,000
120,000
100,000
50,000
+ Net Income
6,000
24,000
30,000
– Dividends
(2,000)
(8,000)
(10,000)
Ending book value
34,000
136,000
100,000
70,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-13 (continued)
1/1/X3
Goodwill = 0
Identifiable
Excess = 0
$120,000
Initial
investment in
Stergis Co.
80%
Book value =
120,000
12/31/X3
Goodwill = 0
Identifiable
Excess = 0
$136,000
Net
investment in
Stergis Co.
80%
Book value =
136,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-33
E5-13 (continued)
b.
Proud
Corp.
Stergis
Co.
Consolidation
Entries
DR
CR
Consolidated
Income Statement
Sales
200,000
120,000
320,000
Less: Depreciation Expense
(25,000)
(15,000)
(40,000)
Less: Other Expenses
(105,000)
(75,000)
(180,000)
Income from Stergis Co.
24,000
24,000
0
Consolidated Net Income
94,000
30,000
24,000
100,000
NCI in Net Income
6,000
(6,000)
Controlling Interest in Net
Income
94,000
30,000
30,000
0
94,000
Statement of Retained Earnings
Beginning Balance
230,000
50,000
50,000
230,000
Net Income
94,000
30,000
30,000
0
94,000
Less: Dividends Declared
(40,000)
(10,000)
10,000
(40,000)
Ending Balance
284,000
70,000
80,000
10,000
284,000
Balance Sheet
Current Assets
173,000
105,000
278,000
Depreciable Assets
500,000
300,000
60,000
740,000
Less: Accumulated Depreciation
(175,000)
(75,000)
60,000
(190,000)
Investment in Stergis Co.
136,000
136,000
0
Total Assets
634,000
330,000
60,000
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
200,000
Retained Earnings
284,000
70,000
80,000
10,000
284,000
NCI in NA of Stergis Co.
34,000
34,000
Total Liabilities & Equity
634,000
330,000
180,000
44,000
828,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-34
E5-13 (continued)
c.
Proud Corporation and Subsidiary
Consolidated Balance Sheet
December 31, 20X3
Current Assets
$278,000
Depreciable Assets
$740,000
Less: Accumulated Depreciation
(190,000)
550,000
Total Assets
$828,000
Current Liabilities
$
90,000
Long-Term Debt
220,000
Stockholders’ Equity:
Controlling Interest:
Common Stock
$200,000
Retained Earnings
284,000
Total Controlling Interest
$484,000
Noncontrolling Interest
34,000
Total Stockholders’ Equity
518,000
Total Liabilities and Stockholders’ Equity
$828,000
Proud Corporation and Subsidiary
Consolidated Income Statement
Year Ended December 31, 20X3
Sales
$320,000
Depreciation
$ 40,000
Other Expenses
180,000
Total Expenses
(220,000)
Consolidated Net Income
$100,000
Income to Noncontrolling Interest
(6,000)
Income to Controlling Interest
$ 94,000
Proud Corporation and Subsidiary
Consolidated Retained Earnings Statement
Year Ended December 31, 20X3
Retained Earnings, January 1, 20X3
$230,000
Income to Controlling Interest, 20X3
94,000
$324,000
Dividends Declared, 20X3
(40,000)
Retained Earnings, December 31, 20X3
$284,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-14 Consolidation Worksheet for Majority-Owned Subsidiary for Second Year
a.
Equity Method Entries on Proud Corp.’s Books:
Investment in Stergis Co.
28,000
Income from Stergis Co.
28,000
Record Proud Corp.’s 80% share of Stergis Co.’s 20X4 income
Cash
12,000
Investment in Stergis Co.
12,000
Record Proud Corp.’s 80% share of Stergis Co.’s 20X4 dividend
Book Value Calculations:
NCI
20%
+
Proud Corp.
80%
=
Common
Stock
+
Retained
Earnings
Beginning book
value
34,000
136,000
100,000
70,000
+ Net Income
7,000
28,000
35,000
– Dividends
(3,000)
(12,000)
(15,000)
Ending book value
38,000
152,000
100,000
90,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-36
E5-14 (continued)
Basic Consolidation Entry
Common Stock
100,000
Retained Earnings
70,000
Income from Stergis Co.
28,000
NCI in NI of Stergis Co.
7,000
Dividends Declared
15,000
Investment in Stergis Co.
152,000
NCI in NA of Stergis Co.
38,000
Investment in
Income from
Stergis Co.
Stergis Co.
Beginning Balance
136,000
80% Net Income
28,000
28,000
80% Net Income
12,000
80% Dividends
Ending Balance
152,000
28,000
Ending Balance
152,000
Basic
28,000
0
0
Optional Accumulated Depreciation Consolidation Entry
Accumulated Depreciation
60,000
Depreciable Assets
60,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-37
E5-14 (continued)
b.
Proud
Corp.
Stergis
Co.
Consolidation
Entries
DR
CR
Consolidated
Income Statement
Sales
230,000
140,000
370,000
Less: Depreciation Expense
(25,000)
(15,000)
(40,000)
Less: Other Expenses
(150,000)
(90,000)
(240,000)
Income from Stergis Co.
28,000
28,000
0
Consolidated Net Income
83,000
35,000
28,000
90,000
NCI 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
83,000
35,000
35,000
0
83,000
Less: Dividends Declared
(50,000)
(15,000)
15,000
(50,000)
Ending Balance
317,000
90,000
105,000
15,000
317,000
Balance Sheet
Current Assets
235,000
150,000
385,000
Depreciable Assets
500,000
300,000
60,000
740,000
Less: Accumulated Depreciation
(200,000)
(90,000)
60,000
(230,000)
Investment in Stergis Co.
152,000
152,000
0
Total Assets
687,000
360,000
60,000
212,000
895,000
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
200,000
Retained Earnings
317,000
90,000
105,000
15,000
317,000
NCI in NA of Stergis Co.
38,000
38,000
Total Liabilities & Equity
687,000
360,000
205,000
53,000
895,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-38
E5-15 Preparation of Stockholders‘ Equity Section with Other Comprehensive Income
a.
Consolidated net income:
20X8
20X9
Operating income of Broadmore
$120,000
$ 140,000
Net income of Stem
40,000
60,000
Amortization of differential ($580,000 – $500,000) / 10
Years
(8,000)
(8,000)
Consolidated net income
$152,000
$ 192,000
Comprehensive gain reported by Stem
10,000
5,000
Consolidated comprehensive income
$162,000
$ 197,000
b.
Comprehensive income attributable to controlling interest:
20X8
20X9
Consolidated comprehensive income
$162,000
$ 197,000
Comprehensive income attributable to
Noncontrolling interest
($50,000 – $8,000) x .25
(10,500)
($65,000 – $8,000) x .25
(14,250)
Comprehensive income attributable to controlling interest
$151,500
$ 182,750
c.
Consolidated stockholders’ equity:
20X8
20X9
Controlling Interest:
Common Stock
$320,000
$ 320,000
Retained Earnings*
504,000
613,000
Accumulated Other Comprehensive Income#
7,500
11,250
Total Controlling Interest
831,500
944,250
Noncontrolling Interest
151,750
158,500
Total Stockholders’ Equity
$983,250
$1,102,750
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-16 Consolidation entries for Subsidiary with Other Comprehensive Income
a.
Equity Method Entries on Palmer Corp.’s Books:
Investment in Krown Corp.
140,000
Cash
140,000
Record the initial investment in Krown Corp.
Investment in Krown Corp.
21,000
Income from Krown Corp.
21,000
Record Palmer Corp.’s 70% share of Krown Corp.’s 20X8 income
Cash
17,500
Investment in Krown Corp.
17,500
Record Palmer Corp.’s 70% share of Krown Corp.’s 20X8 dividend
Investment in Krown Corp.
4,200
Other Comprehensive Income from Krown Corp.
4,200
Record Palmer Corp.’s proportionate share of OCI from Krown Corp.
Book Value Calculations:
NCI
30%
+
Palmer Corp.
70%
=
Common
Stock
+
Retained
Earnings
Beginning book
value
60,000
140,000
120,000
80,000
+ Net Income
9,000
21,000
30,000
– Dividends
(7,500)
(17,500)
(25,000)
Ending book value
61,500
143,500
120,000
85,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-40
E5-16 (continued)
Basic Consolidation Entry
Common Stock
120,000
Retained Earnings
80,000
Income from Krown Corp.
21,000
NCI in NI of Krown Corp.
9,000
Dividends Declared
25,000
Investment in Krown Corp.
143,500
NCI in NA of Krown Corp.
61,500
Other Comprehensive Income Entry:
OCI from Krown Corp.
4,200
OCI to the NCI
1,800
Investment in Krown Corp.
4,200
NCI in NA of Krown Corp.
1,800
Investment in
Income from
Krown Corp.
Krown Corp.
Acquisition Price
140,000
70% Net Income
21,000
21,000
17,500
70% Dividends
4,200
70% OCI
Ending Balance
147,700
21,000
143,500
Basic
21,000
4,200
OCI Entry
0
0