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r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Solutions14-20
14.29 b. continued.
Sales Revenue
……………..
$ 400,000 $ 125,000 $
525,000
Equity in Earnings of
Valley
Company……….
tive
Expense……………..
(64,000
)
Income Tax Expense
Retained
Earnings…………………………………………….
Investment in Valley Compa
n
y
0
Assets = Liabilities +
Shareholders’
Equity (Class.)
–56,000 –5,000 ContriCap
–51,000 RE
To eliminate the investment account and the
share-
holders’ equity accounts of Valley
Company.
An alternative elimination entry using amounts before closing
entries is as follows:
Common
Stock………………………………………………….
5,000
Retained
Earnings…………………………………………….
45,000
Equity in Earnings of Valley
Company
……………….
10,000
Dividends Declared
……………………………………….
4,00
0
Investment in Valley Compa
n
y
………………………
0
Assets = Liabilities +
Shareholders’
Equity (Class.)
To eliminate the investment account and the
share-
holders’ equity accounts of Valley
Company.
14-21Solutions
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
nd e.
Peak Valley
Company Company Consolidat
e
d
Assets
Ca
sh
………………………..
….
Accounts R
Investment in Valley
Company (Using the
Equity
Method)…………
74,000a— —
Other A
………………..
Total Assets
0
c. January 1
Investment in Valley Compa
n
y …………………………. 70,000
Assets = Liabilities +
Shareholders’
Equity (Class.)
Company.
December 31
Investment in Valley Compa
n
Assets = Liabilities +
Shareholders’
Equity (Class.)
RE
To recognize share of Valley Company’s
earnings.
December 31
Ca
sh
Assets = Liabilities +
Shareholders’
Equity (Class.)
To recognize dividend received from Valley
Company.
December 31
Selling and Administrative Expe
ns
e
s
Assets = Liabilities +
Shareholders’
Equity (Class.)
–2,000 –2,000
To recognize acquisition of excess cost: $2,000
=
$20,000/10.
Solutions14-22
d. a
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Accounts Payable
…………
$ 80,000 $ 25,000 $ 97,
00
0
Bonds
P
ayab
l
e
……………..
Common
Valley
0
$ 3
2
, 00
0
The elimination entry (not required) is as follows:
n
14-23Solutions
14.29 d. and e. continued.
Assets = Liabilities +
Shareholders’
Equity (Class.)
Alternative elimination entries using amounts before closing
entries are as follows:
Common
Stock………………………………………………….
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Retained
Earnings…………………………………………….
Equity in Earnings of Valley
Other A
Dividends Declared
0
Investment in Valley Compa
n
y
………………………
0
Assets = Liabilities +
Shareholders’
Equity (Class.)
+18,000 –5,000 ContriCap
–74,000 –45,000 RE
–10,000
IncSt ïƒ
RE
+4,000 RE
To eliminate the investment account and the
share-
holders’ equity accounts of Valley
Company.
Assets = Liabilities +
Shareholders’
Equity (Class.)
Solutions14-24
14.30 (Parent Company and Sub Company; equity method and
consolidated financial statements with noncontrolling interest.)
(amounts in US$)
AssetsParent
Sub
Company Company
Consolidated
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Accounts Payable
……………….
Total
$
Noncontrolling Interest in
Assets of Sub
$
Common
20,00
Total Shareholders’
$
Total Liabilities and
holders’ Equity
$
Investment in Sub Company
(Using Equity Method) ……
0
$ 60
0
Liabilities and Share-
holders’ Equity
Sales
Revenue
……………………
945,000
Equity in Earnings of Sub
Company …………………….
…
16,000 — —
Cost of Goods Sold
(620,000) (85,000)
(705,000
Selling and Administrative
Expense ……………………..
….
)
Income Tax Expe
ns
e
(
2
4
,00
0
)
(
1
0
,00
0
)
Net Income of Consolidated
…
$ 37,000 $ 20,000
$
41,000
Noncontrolling Interest in
Net
Income of Sub
Company…..
—
—
(
4
, 00
0
Net
Income…………………………
$
3
7
, 00
0 $
2
0
0
$
3
7
, 00
0
14-2Solutions
The elimination and reclassification entry (not required) is as
follows:
Common
Stock
……………………………………………………..
Retained Earnings
Investment in Sub
0
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Assets = Liabilities +
Shareholders’
Equity (Class.)
Alternative elimination entries using amounts before closing entries
are as follows:
Common
Stock
……………………………………………………..
Retained Earnings
Equity in Earnings of Sub Company
Dividend
0
Investment in Sub
Company……………………………..
0
Assets = Liabilities +
Shareholders’
Equity (Class.)
Solutions14-26
Common
Assets = Liabilities +
Shareholders’
Equity (Class.)
Company.
An alternative elimination entry using amounts before closing
entries is as follows:
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Common
Stock
Assets = Liabilities +
Shareholders’
Equity (Class.)
14-27Solutions
14.31 (Ganton; efect of intercorporate investment policies on financial
statements.) (amounts in millions of US$)
a. Ganton’s acquisition cost of its investments in the bottlers
exceeds the carrying value of the net assets of the bottlers.
Excess of Fair Value over Carrying Value of Net
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Assets
9
b. (1) Equity Method
(2) Consolidation
c. The bottlers have a heavier proportion of noncurrent assets and
Solutions14-28
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
nd e.
Peak Valley
Company Company Consolidat
e
d
Assets
Ca
sh
………………………..
….
Accounts R
Investment in Valley
Company (Using the
Equity
Method)…………
74,000a— —
Other A
………………..
Total Assets
0
c. January 1
Investment in Valley Compa
n
y …………………………. 70,000
Assets = Liabilities +
Shareholders’
Equity (Class.)
Company.
December 31
Investment in Valley Compa
n
Assets = Liabilities +
Shareholders’
Equity (Class.)
RE
To recognize share of Valley Company’s
earnings.
December 31
Ca
sh
Assets = Liabilities +
Shareholders’
Equity (Class.)
To recognize dividend received from Valley
Company.
December 31
Selling and Administrative Expe
ns
e
s
Assets = Liabilities +
Shareholders’
Equity (Class.)
–2,000 –2,000
To recognize acquisition of excess cost: $2,000
=
$20,000/10.
Solutions14-22
d. a
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Accounts Payable
…………
$ 80,000 $ 25,000 $ 97,
00
0
Bonds
P
ayab
l
e
……………..
Common
Valley
0
$ 3
2
, 00
0
The elimination entry (not required) is as follows:
n
14-23Solutions
14.29 d. and e. continued.
Assets = Liabilities +
Shareholders’
Equity (Class.)
Alternative elimination entries using amounts before closing
entries are as follows:
Common
Stock………………………………………………….
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Retained
Earnings…………………………………………….
Equity in Earnings of Valley
Other A
Dividends Declared
0
Investment in Valley Compa
n
y
………………………
0
Assets = Liabilities +
Shareholders’
Equity (Class.)
+18,000 –5,000 ContriCap
–74,000 –45,000 RE
–10,000
IncSt ïƒ
RE
+4,000 RE
To eliminate the investment account and the
share-
holders’ equity accounts of Valley
Company.
Assets = Liabilities +
Shareholders’
Equity (Class.)
Solutions14-24
14.30 (Parent Company and Sub Company; equity method and
consolidated financial statements with noncontrolling interest.)
(amounts in US$)
AssetsParent
Sub
Company Company
Consolidated
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Accounts Payable
……………….
Total
$
Noncontrolling Interest in
Assets of Sub
$
Common
20,00
Total Shareholders’
$
Total Liabilities and
holders’ Equity
$
Investment in Sub Company
(Using Equity Method) ……
0
$ 60
0
Liabilities and Share-
holders’ Equity
Sales
Revenue
……………………
945,000
Equity in Earnings of Sub
Company …………………….
…
16,000 — —
Cost of Goods Sold
(620,000) (85,000)
(705,000
Selling and Administrative
Expense ……………………..
….
)
Income Tax Expe
ns
e
(
2
4
,00
0
)
(
1
0
,00
0
)
Net Income of Consolidated
…
$ 37,000 $ 20,000
$
41,000
Noncontrolling Interest in
Net
Income of Sub
Company…..
—
—
(
4
, 00
0
Net
Income…………………………
$
3
7
, 00
0 $
2
0
0
$
3
7
, 00
0
14-2Solutions
The elimination and reclassification entry (not required) is as
follows:
Common
Stock
……………………………………………………..
Retained Earnings
Investment in Sub
0
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Assets = Liabilities +
Shareholders’
Equity (Class.)
Alternative elimination entries using amounts before closing entries
are as follows:
Common
Stock
……………………………………………………..
Retained Earnings
Equity in Earnings of Sub Company
Dividend
0
Investment in Sub
Company……………………………..
0
Assets = Liabilities +
Shareholders’
Equity (Class.)
Solutions14-26
Common
Assets = Liabilities +
Shareholders’
Equity (Class.)
Company.
An alternative elimination entry using amounts before closing
entries is as follows:
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Common
Stock
Assets = Liabilities +
Shareholders’
Equity (Class.)
14-27Solutions
14.31 (Ganton; efect of intercorporate investment policies on financial
statements.) (amounts in millions of US$)
a. Ganton’s acquisition cost of its investments in the bottlers
exceeds the carrying value of the net assets of the bottlers.
Excess of Fair Value over Carrying Value of Net
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Assets
9
b. (1) Equity Method
(2) Consolidation
c. The bottlers have a heavier proportion of noncurrent assets and
Solutions14-28