Exam 10: Subsidiary Preferred Stock, consolidated Earnings Per Share, and Consolidated Income Taxation

Use the following information to answer the question(s)below. On January 1,2011,Pamplin Corporation stockholders' equity consisted of $1,000,000 of $10 par value Common Stock,$750,000 of Additional Paid-in Capital,and $3,000,000 of Retained Earnings.On January 1,2011,Pamplin purchased 90% of the outstanding common stock of Sage Corporation for $1,500,000 with all excess purchase cost assigned to goodwill.The stockholders' equity of Sage on this date consisted of $800,000 of $100 par value,8% cumulative,preferred stock callable at $105,$900,000 of $10 par value common stock and $500,000 of Retained Earnings.Sage's net income for 2011 was $100,000. On January 1,2011,no preferred dividends are in arrears.No dividends are declared or paid in 2011.In a separate transaction on January 1,2011,Pamplin purchased 70% of Sage's preferred stock for $600,000. -For the year ending December 31,2011,the amount of Pamplin's income from Sage (associated with the common stock investment in Sage)is

Pretax operating incomes of Panitz Corporation and its 80%-owned subsidiary,Salazar Corporation,for the year 2011,are shown below. Panitz and Salazar belong to an affiliated group.Salazar pays total dividends of $35,000 for the year.There are no unamortized book value/fair value differentials relating to Panitz's investment in Salazar.During the year,Panitz sold land to Salazar at a total loss of $15,000 which is included in its pretax operating income.Salazar still holds this land at the end of the year.The marginal corporate tax rate for both corporations is 34%. Required: 1.Determine the separate amounts of income tax expense for Panitz and Salazar as if they had filed separate tax returns. 2.Determine Panitz's net income from Salazar.

How much should the Parminter's Investment in Sanchez-Common Stock,change during 2011?

Parnaby has 25,000 common stock shares outstanding and its 100%-owned subsidiary Sandal has 5,000 common stock shares outstanding.Parnaby and Sandal do not have any potentially dilutive securities outstanding.The separate net incomes for Parnaby and Sandal is $150,000 and $75,000 respectively.Diluted EPS for the consolidated company is

Palomba Corporation allocates consolidated income taxes to its 90%-owned subsidiary using the percentage allocation method.Under this method,consolidated income tax expense will be allocated to a subsidiary

Use the following information to answer the question(s)below. On January 1,2011,Pardy Corporation acquired a 70% interest in the common stock of Salter Corporation for $7,000,000 when Salter's stockholders' equity was as follows: There were no preferred dividends in arrears on January 1,2011.There are no book value/fair value differentials. -What is the implied goodwill for Salter based on Pardy's purchase price for Salter on January 1,2011?

Pretax operating incomes of Pang Corporation and its 70%-owned subsidiary,Sala Corporation,for the year 2011,are shown below.Sala pays total dividends of $60,000 for the year.There are no unamortized book value/fair value differentials relating to Pang's investment in Sala.During the year,Pang sold land to Sala for a gain of $35,000 and Sala holds this land at the end of the year.The marginal corporate tax rate for both corporations is 34%. Required: 1.Determine the separate amounts of income tax expense for Pang and Sala as if they had filed separate tax returns. 2.Determine Pang's net income from Sala.

Pandy Corporation owns a 90% interest in Sakaj Corporation's common stock.Throughout 2010,Sakaj had 20,000 shares of common stock outstanding and Pandy had 50,000 shares of common stock outstanding.Sakaj's only dilutive security consists of 10,000 stock options,with an exercise price of $20 per share.The average price of Sakaj's stock is $50 per share in 2010.The options are exercisable for one share of Sakaj's common stock.Pandy's and Sakaj's separate net incomes for the year are $200,000 and $180,000,respectively. Required: Compute the amount of basic and diluted earnings per share for Pandy (Consolidated)and Sakaj Corporations.

Sandy Corporation's stockholders' equity on December 31,2010 was as follows: On January 1,2011,Bombard Corporation paid $200,000 for a 90% interest in Sandy's common stock.On January 1,2011,the book values of Sandy's assets and liabilities were equal to fair values.On January 2,2011,Bombard Corporation paid $120,000 for a 90% interest in Sandy's preferred stock. Required: 1.Determine the book value of the common stockholders' equity for Sandy Corporation on January 1,2011. 2.Prepare the journal entry(ies)on January 1,2011 for Bombard Corporation. 3.Prepare the journal entry(ies)on January 2,2011 for Bombard Corporation. 4.For the year ending December 31,2011,Sandy Corporation reported net income of $50,000.Sandy Corporation declared and paid dividends of $20,000 to preferred stockholders and $10,000 to common stockholders.Prepare the journal entries for Bombard Corporation relating to this information.

A subsidiary has dilutive securities outstanding that include convertible bonds payable.The bonds are convertible into the parent's common stock.When calculating consolidated diluted earnings per share,the convertible bonds will affect

When a subsidiary has preferred stock that is convertible into subsidiary common stock,the parent's equity in the subsidiary's diluted earnings is calculated by the number of

Paradise Corporation owns 100% of Aldred Corporation,90% of Balme Corporation,80% of Calder Corporation,75% of Dale Corporation,20% of East Corporation,and 8% of Faber Corporation.Paradise,Aldred,Balme and Calder belong to an affiliated group.All of these corporations are domestic corporations.During 2011,Paradise Corporation reports net income of $1,500,000.This net income includes the full amount of dividends received from Aldred and Faber,but does not include the dividends received from Balme,Calder,Dale,and East Corporations.All investees have paid out all of their net income in the form of dividends.Paradise's share of the various dividend distributions is as follows: Required: Calculate the correct amount of taxable income for Paradise Corporation if a consolidated tax return is filed.

Assume a company's preferred stock is cumulative with a call provision and has dividends in arrears.The amount of stockholders' equity allocated to preferred stockholders is equal to the number of shares outstanding times the

Use the following information to answer the question(s)below. On January 1,2011,Pardy Corporation acquired a 70% interest in the common stock of Salter Corporation for $7,000,000 when Salter's stockholders' equity was as follows: There were no preferred dividends in arrears on January 1,2011.There are no book value/fair value differentials. -Salter has a 2011 net loss of $200,000.No dividends are declared or paid in 2011.What is the change in Pardy's Investment in Salter for the year ending December 31,2011?

Palm owns a 70% interest in Sable,a domestic subsidiary.Sable is not part of Palm's affiliated group.Palm will pay taxes on