Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5–37 Subsidiary with Other Comprehensive Income in Year of Acquisition
a.
Equity Method Entries on Amber Corp.’s Books:
Investment in Sparta Co.
96,000
Cash
96,000
Record the initial investment in Sparta Co.
Investment in Sparta Co.
15,000
Income from Sparta Co.
15,000
Record Amber Corp.’s 60% share of Sparta Co.’s 20X8 income
Cash
9,000
Investment in Sparta Co.
9,000
Record Amber Corp.’s 60% share of Sparta Co.’s 20X8 dividend
Investment in Sparta Co.
6,000
Other Comprehensive Income from Sparta Co.
6,000
Record share of increase in value of securities held by Sparta Co.
Book Value Calculations:
NCI
40%
+
Amber Corp.
60%
=
Common
Stock
+
Retained
Earnings
Beginning book
value
64,000
96,000
100,000
60,000
+ Net Income
10,000
15,000
25,000
– Dividends
(6,000)
(9,000)
(15,000)
Ending book value
68,000
102,000
100,000
70,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-72
P5–37 (continued)
Basic Consolidation Entry
Common Stock
100,000
Retained Earnings
60,000
Income from Sparta Co.
15,000
NCI in NI of Sparta Co.
10,000
Dividends Declared
15,000
Investment in Sparta Co.
102,000
NCI in NA of Sparta Co.
68,000
Other Comprehensive Income Entry:
OCI from Sparta Co.
6,000
OCI to the NCI
4,000
Investment in Sparta Co.
6,000
NCI in NA of Sparta Co.
4,000
Optional Accumulated Depreciation Consolidation Entry
Accumulated Depreciation
75,000
Building & Equipment
75,000
Investment in
Income from
Sparta Co.
Sparta Co.
Acquisition Price
96,000
60% Net Income
15,000
15,000
60% Net Income
9,000
60% Dividends
6,000
OCI Entry
Ending Balance
108,000
15,000
Ending Balance
102,000
Basic
15,000
6,000
OCI
0
0
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-73
P5–37 (continued)
b.
Amber
Corp.
Sparta
Co.
Consolidation
Entries
DR
CR
Consolidated
Income Statement
Sales
220,000
148,000
368,000
Less: COGS
(150,000)
(110,000)
(260,000)
Less: Depreciation Expense
(30,000)
(10,000)
(40,000)
Less: Interest Expense
(8,000)
(3,000)
(11,000)
Income from Sparta Co.
15,000
15,000
0
Consolidated Net Income
47,000
25,000
15,000
57,000
NCI in Net Income
10,000
(10,000)
Controlling Interest in Net Income
47,000
25,000
25,000
0
47,000
Statement of Retained Earnings
Beginning Balance
208,000
60,000
60,000
208,000
Net Income
47,000
25,000
25,000
0
47,000
Less: Dividends Declared
(24,000)
(15,000)
15,000
(24,000)
Ending Balance
231,000
70,000
85,000
15,000
231,000
Balance Sheet
Cash
27,000
8,000
35,000
Accounts Receivable
65,000
22,000
87,000
Inventory
40,000
30,000
70,000
Buildings & Equipment
500,000
235,000
75,000
660,000
Less: Accumulated Depreciation
(140,000)
(85,000)
75,000
(150,000)
Investment in Row Company
40,000
40,000
Investment in Sparta Co.
108,000
102,000
0
6,000
Total Assets
600,000
250,000
75,000
183,000
742,000
Accounts Payable
63,000
20,000
83,000
Bonds Payable
100,000
50,000
150,000
Common Stock
200,000
100,000
100,000
200,000
Retained Earnings
231,000
70,000
85,000
15,000
231,000
Accumulated OCI
6,000
10,000
10,000
6,000
NCI in NA of Sparta Co.
68,000
72,000
4,000
Total Liabilities & Equity
600,000
250,000
195,000
87,000
742,000
Other Comprehensive Income
Accumulated Other Comprehensive
Income, 1/1/20X8
0
Other Comprehensive Income from
Sparta Co.
6,000
6,000
0
Unrealized Gain on Investments
10,000
10,000
Other Comprehensive Income to NCI
4,000
(4,000)
Accumulated Other Comprehensive
Income, 12/31/20X8
6,000
10,000
10,000
0
6,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5–37 (continued)
c.
Amber Corporation and Subsidiary
Consolidated Balance Sheet
December 31, 20X8
Cash
$ 35,000
Accounts Receivable
87,000
Inventory
70,000
Buildings and Equipment
$660,000
Less: Accumulated Depreciation
(150,000)
510,000
Investment in Marketable Securities
40,000
Total Assets
$742,000
Accounts Payable
$ 83,000
Bonds Payable
150,000
Stockholders’ Equity:
Controlling Interest:
Common Stock
$200,000
Retained Earnings
231,000
Accumulated Other Comprehensive Income
6,000
Total Controlling Interest
$437,000
Noncontrolling Interest
72,000
Total Stockholders’ Equity
509,000
Total Liabilities and Stockholders’ Equity
$742,000
Amber Corporation and Subsidiary
Consolidated Income Statement
Year Ended December 31, 20X8
Sales
$368,000
Cost of Goods Sold
$260,000
Depreciation Expense
40,000
Interest Expense
11,000
Total Expenses
(311,000)
Consolidated Net Income
$ 57,000
Income to Noncontrolling Interest
(10,000)
Income to Controlling Interest
$ 47,000
Amber Corporation and Subsidiary
Consolidated Statement of Comprehensive Income
Year Ended December 31, 20X8
Consolidated Net Income
$57,000
Other Comprehensive Income:
Unrealized Gain on Investments Held by Subsidiary
10,000
Total Consolidated Comprehensive Income
$67,000
Less: Comprehensive Income Attributable to
Noncontrolling Interest
(14,000)
Comprehensive Income Attributable to Controlling
Interest
$53,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5–38 Subsidiary with Other Comprehensive Income in Year Following
Acquisition
a.
Equity Method Entries on Amber Corp.’s Books:
Investment in Sparta Co.
18,000
Income from Sparta Co.
18,000
Record Amber Corp.’s 60% share of Sparta Co.’s 20X9 income
Cash
12,000
Investment in Sparta Co.
12,000
Record Amber Corp.’s 60% share of Sparta Co.’s 20X9 dividend
Investment in Sparta Co.
2,400
Other Comprehensive Income from Sparta Co.
2,400
Record share of increase in value of securities held by Sparta Co.
Book Value Calculations:
NCI
40%
+
Amber Corp.
60%
=
Common
Stock
+
Retained
Earnings
+
AOCI
Beginning book
value
72,000
108,000
100,000
70,000
10,000
+ Net Income
12,000
18,000
30,000
– Dividends
(8,000)
(12,000)
(20,000)
Ending book value
76,000
114,000
100,000
80,000
10,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-76
P5–38 (continued)
Basic Consolidation Entry
Common Stock
100,000
Retained Earnings
70,000
Accumulated OCI
10,000
Income from Sparta Co.
18,000
NCI in NI of Sparta Co.
12,000
Dividends Declared
20,000
Investment in Sparta Co.
114,000
NCI in NA of Sparta Co.
76,000
Other Comprehensive Income Entry:
OCI from Sparta Co.
2,400
OCI to the NCI
1,600
Investment in Sparta Co.
2,400
NCI in NA of Sparta Co.
1,600
Optional Accumulated Depreciation Consolidation Entry
Accumulated Depreciation
75,000
Building & Equipment
75,000
Investment in
Income from
Sparta Co.
Sparta Co.
Beginning Balance
108,000
60% Net Income
18,000
18,000
60% Net Income
12,000
60% Dividends
2,400
OCI Entry
Ending Balance
116,400
18,000
Ending Balance
114,000
Basic
18,000
2,400
OCI
0
0
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-77
P5–38 (continued)
b.
Amber
Corp.
Sparta
Co.
Consolidation
Entries
DR
CR
Consolidated
Income Statement
Sales
250,000
140,000
390,000
Less: COGS
(170,000)
(97,000)
(267,000)
Less: Depreciation Expense
(30,000)
(10,000)
(40,000)
Less: Interest Expense
(8,000)
(3,000)
(11,000)
Income from Sparta Co.
18,000
18,000
0
Consolidated Net Income
60,000
30,000
18,000
72,000
NCI in Net Income
12,000
(12,000)
Controlling Interest in Net
Income
60,000
30,000
30,000
0
60,000
Statement of Retained Earnings
Beginning Balance
231,000
70,000
70,000
231,000
Net Income
60,000
30,000
30,000
0
60,000
Less: Dividends Declared
(40,000)
(20,000)
20,000
(40,000)
Ending Balance
251,000
80,000
100,000
20,000
251,000
Balance Sheet
Cash
18,000
11,000
29,000
Accounts Receivable
45,000
21,000
66,000
Inventory
40,000
30,000
70,000
Buildings & Equipment
585,000
257,000
75,000
767,000
Less: Accumulated Depreciation
(170,000)
(95,000)
75,000
(190,000)
Investment in Row Company
44,000
44,000
Investment in Sparta Co.
116,400
114,000
0
2,400
Total Assets
634,400
268,000
75,000
191,400
786,000
Accounts Payable
75,000
24,000
99,000
Bonds Payable
100,000
50,000
150,000
Common Stock
200,000
100,000
100,000
200,000
Retained Earnings
251,000
80,000
100,000
20,000
251,000
Accumulated OCI
8,400
14,000
14,000
8,400
NCI in NA of Sparta Co.
76,000
77,600
1,600
Total Liabilities & Equity
634,400
268,000
214,000
97,600
786,000
Other Comprehensive Income
Accumulated Other Comprehensive
Income, 1/1/20X9
6,000
10,000
10,000
6,000
Other Comprehensive Income from
Sparta Co.
2,400
2,400
0
Unrealized Gain on Investments
4,000
4,000
Other Comprehensive Income to NCI
1,600
(1,600)
Accumulated Other Comprehensive
Income, 12/31/20X9
8,400
14,000
14,000
0
8,400
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5–39 Comprehensive Problem: Majority-Owned Subsidiary
a.
Equity Method Entries on Master Corp.’s Books:
Investment in Stanley Wood Co.
24,000
Income from Stanley Wood Co.
24,000
Record Master Corp.’s 80% share of Stanley Wood Co.‘s 20X5 income
Cash
8,000
Investment in Stanley Wood Co.
8,000
Record Master Corp.’s 80% share of Stanley Wood Co.’s 20X5
dividend
Income from Stanley Wood Co.
4,000
Investment in Stanley Wood Co.
4,000
Record amortization of excess acquisition price
Book Value Calculations:
NCI
20%
+
Master Corp.
80%
=
Common
Stock
+
Retained
Earnings
Beginning book
value
38,000
152,000
100,000
90,000
+ Net Income
6,000
24,000
30,000
– Dividends
(2,000)
(8,000)
(10,000)
Ending book value
42,000
168,000
100,000
110,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-79
P5-39 (continued)
Basic consolidation entry
Common stock
100,000
Retained earnings
90,000
Income from Stanley Wood Co.
24,000
NCI in NI of Stanley Wood Co.
6,000
Dividends declared
10,000
Investment in Stanley Wood Co.
168,000
NCI in NA of Stanley Wood Co.
42,000
Excess Value (Differential) Calculations:
NCI
20%
+
Master Corp.
80%
=
Buildings &
Equipment
+
Acc. Depr.
Beginning balance
6,000
24,000
50,000
(20,000)
Changes
(1,000)
(4,000)
(5,000)
Ending balance
5,000
20,000
50,000
(25,000)
Amortized excess value reclassification entry:
Depreciation expense
5,000
Income from Stanley Wood Co.
4,000
NCI in NI of Stanley Wood Co.
1,000
Excess value (differential) reclassification entry:
Buildings & Equipment
50,000
Accumulated Depreciation
25,000
Investment in Stanley Wood Co.
20,000
NCI in NA of Stanley Wood Co.
5,000
Eliminate intercompany accounts:
Accounts payable
10,000
Cash and receivables
10,000
Investment in
Income from
Stanley Wood Co.
Stanley Wood Co.
Beginning
Balance
176,000
80% Net Income
24,000
24,000
80% Net Income
8,000
80% Dividends
4,000
Excess Val. Amort.
4,000
Ending Balance
188,000
20,000
Ending Balance
168,000
Basic
24,000
20,000
Excess Reclass.
4,000
Amort. Reclass.
0
0
Optional accumulated depreciation consolidation entry
Accumulated depreciation
10,000
Building & equipment
10,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-80
P5-39 (continued)
c.
Master
Corp.
Stanley
Wood
Co.
Consolidation
Entries
DR
CR
Consolidated
Income Statement
Sales
200,000
100,000
300,000
Less: COGS
(120,000)
(50,000)
(170,000)
Less: Depreciation Expense
(25,000)
(15,000)
5,000
(45,000)
Less: Inventory Losses
(15,000)
(5,000)
(20,000)
Income from Stanley Wood Co.
20,000
24,000
4,000
0
Consolidated Net Income
60,000
30,000
29,000
4,000
65,000
NCI in Net Income
6,000
1,000
(5,000)
Controlling Interest in Net Income
60,000
30,000
35,000
5,000
60,000
Statement of Retained Earnings
Beginning Balance
314,000
90,000
90,000
314,000
Net Income
60,000
30,000
35,000
5,000
60,000
Less: Dividends Declared
(30,000)
(10,000)
10,000
(30,000)
Ending Balance
344,000
110,000
125,000
15,000
344,000
Balance Sheet
Cash and Receivables
81,000
65,000
10,000
136,000
Inventory
260,000
90,000
350,000
Land
80,000
80,000
160,000
Buildings & Equipment
500,000
150,000
50,000
10,000
690,000
Less: Accumulated Depreciation
(205,000)
(105,000)
10,000
25,000
(325,000)
Investment in Stanley Wood Co.
188,000
168,000
0
20,000
Total Assets
904,000
280,000
50,000
223,000
1,011,000
Accounts Payable
60,000
20,000
10,000
70,000
Notes Payable
200,000
50,000
250,000
Common Stock
300,000
100,000
100,000
300,000
Retained Earnings
344,000
110,000
125,000
15,000
344,000
NCI in NA of Stanley Wood Co.
42,000
47,000
5,000
Total Liabilities & Equity
904,000
280,000
235,000
62,000
1,011,000