Exam 8: Consolidations - Changes in Ownership Interests

Consider a sale of stock by a subsidiary to parties outside the consolidated entity.This transaction requires an adjustment of the parent's investment and additional paid-in capital accounts except when

If a parent company and outside investors purchase shares of a subsidiary in relation to existing stock ownership (ratably),then

On December 31,2011,Potter Corporation has the following stockholders' equity: On January 1,2012,Potter Corporation declared and issued a 10% stock dividend when the market price per share was $50. On January 2,2012,Corrao Corporation purchased an 80% interest in Potter Corporation for $250,000 on the open market.On January 2,2012,the fair value of Potter's individual assets and liabilities was equal to book value.Any excess cost over book value is attributed to goodwill. Required: 1.Prepare the journal entry(ies)for Potter Corporation on January 1,2012. 2.Prepare the journal entry(ies)for Corrao Corporation on January 2,2012. 3.Prepare the elimination entry(ies)for consolidating work papers on January 2,2012. 4.Prepare the elimination entry(ies)for consolidating work papers on January 2,2012 if the 10% stock dividend is not declared and issued on January 1,2012.

On April 1,2011,Paramount Company acquires 100% of the outstanding stock of Yester Company on the open market.Paramount and Yester have December 31 fiscal year ends.Under GAAP,a consolidated income statement for the year ending December 31,2011,will include

At December 31,2012 year-end,Lapwing Corporation's investment in Ground Inc.was $200,000 consisting of 80% of Ground's $250,000 stockholders' equity on that date.On April 1,2013,Lapwing sold 20% interest (one-fourth of its holdings)in Ground for $65,000.During 2013,Ground had net income of $75,000(earned uniformly)and on July 1,2013,Ground paid dividends of $40,000.Lapwing uses the equity method to account for the investment. Required: 1.What is the gain or loss on sale of the 20% interest? 2.Record the journal entries for Lapwing for the year ending December 31,2013.Use the actual-sale-date assumption.

Anthony Company declared and paid $20,000 of dividends during 2011.The schedule of dividends follows: Anthony Company was acquired on June 1,2011 by Google Company.Google acquired 100 percent of Anthony Company.Both companies have a December 31 fiscal year end.What is the amount of preacquisition dividends in 2011?

Use the following information to answer the question(s)below. Bower Corporation purchased a 70% interest in Stage Corporation on June 1,2010 at a purchase price of $350,000.On June 1,2010,the book values of Stage's assets and liabilities were equal to fair values.On June 1,2010,Stage's stockholders' equity consisted of $290,000 of Common Stock and $210,000 of Retained Earnings.All cost-book differentials were attributed to goodwill. During 2010,Stage earned $120,000 of net income,earned uniformly throughout the year and paid $6,000 of dividends on March 1 and another $6,000 on September 1. -Noncontrolling interest share for 2010 is

A subsidiary split its stock 2 for 1.Which of the following statements is false?

Use the following information to answer the question(s)below. Great Corporation acquired a 90% interest in SOS Corporation at its $810,000 book value on December 31,2010.A summary of the stockholders' equity for SOS at the end of 2010 and 2011 is as follows: On January 1,2012,SOS sold 10,000 new shares of its $10 par value common stock for $45 per share. -If SOS sold the additional shares directly to Great,Great's Investment in SOS account after the sale would be

On December 31,2011,Dixie Corporation has the following information available: On December 31,2011,Grimsled Corporation buys an 80% interest in Dixie Corporation for $240,000.On December 31,2011,the fair value of Dixie's assets and liabilities are equal to the respective book values. Required: 1.On January 1,2012,Dixie Corporation sells 5,000 additional shares of common stock to noncontrolling stockholders at $20 per share.Prepare the journal entry for Grimsled Corporation on January 1,2012. 2.On January 1,2012,Dixie Corporation sells 5,000 additional shares of common stock to noncontrolling stockholders at $35 per share.Prepare the journal entry for Grimsled Corporation on January 1,2012. 3.On January 1,2012,Dixie Corporation sells 5,000 additional shares of common stock to noncontrolling stockholders at $10 per share.Prepare the journal entry for Grimsled Corporation on January 1,2012.

Use the following information to answer the question(s)below. Great Corporation acquired a 90% interest in SOS Corporation at its $810,000 book value on December 31,2010.A summary of the stockholders' equity for SOS at the end of 2010 and 2011 is as follows: On January 1,2012,SOS sold 10,000 new shares of its $10 par value common stock for $45 per share. -If SOS sold the additional shares to the general public,Great's Investment in SOS account after the sale would be ________.(Use four decimal places. )

Use the following information to answer the question(s)below. Goldberg Corporation owned a 70% interest in Savannah Corporation on December 31,2010,and Goldberg's Investment in Savannah account had a balance of $3,900,000.Savannah's stockholders' equity on this date was as follows: On January 1,2011,Savannah issues 80,000 new shares of common stock to Goldberg for $16 each. -What is Goldberg's percentage ownership in Savannah after Savannah issues its stock to Goldberg?

At January 1,2010,the stockholders' equity of Raven Corporation and its 60%-owned subsidiary,Trunk Corporation,are as follows: Trunk's net income for 2010 was $40,000.No dividends were declared or paid in 2010.Raven's Investment in Trunk account balance on December 31,2010 was equal to its underlying equity on December 31,2010.Trunk Corporation issued 10,000 additional shares of common stock directly to Raven on January 1,2011 at $22 per share. Required: 1.Compute the balance in Raven's Investment in Trunk account on January 1,2011 after its purchase of the additional Trunk shares. 2.Determine the increase or decrease in goodwill stemming from Raven's investment in the 10,000 Trunk shares.Assume the fair value and book value of Trunk's assets and liabilities are equal.

On September 1,2011,Nelson Corporation acquired a 90% interest in Corbin Corporation for $900,000.Corbin's stockholders' equity at January 1,2011 consisted of $200,000 of Common Stock and $600,000 of Retained Earnings.The book values of its assets and liabilities were equal to their respective fair values on this date.All excess purchase cost was attributed to goodwill. During 2011,Corbin uniformly earned $98,000 and paid dividends of $19,000 on each of four dates: February 1,June 1,August 1,and December 1. Required: Compute the following: 1.Implied goodwill associated with Corbin Corporation based on Nelson's purchase price on September 1,2011. 2.Nelson's income from Corbin for 2011. 3.Preacquisition income for Nelson Corporation and Subsidiary for 2011. 4.Noncontrolling interest share for 2011. 5.What is the balance in Nelson's Investment in Corbin account at December 31,2011?

A 15% stock dividend by a subsidiary causes

On January 1,2010,Starling Corporation held an 80% interest in Twig Corporation and the investment account balance was $900,000.On January 1,2010,Twig's total stockholders' equity was $1,125,000. During 2010,Twig uniformly earned $234,000 and paid dividends of $37,500 on April 1 and again on October 1.On August 1,2010,Starling sold 30% of its investment in Twig for $262,500,thereby reducing its interest in Twig to 56%. Required: Compute the following using the actual sales date assumption: 1.Gain or loss on sale. 2.Income from Twig for 2010. 3.Noncontrolling interest share for 2010.

Use the following information to answer the question(s)below. On December 31,2010,Giant Corporation's Investment in Penguin Corporation account had a balance of $500,000.The balance consisted of 80% of Penguin's $625,000 stockholders' equity on that date.Giant owns 80% of Penguin.On January 2,2011,Penguin increased its outstanding common stock from 15,000 to 18,000 shares. -Assume that Penguin sold the additional 3,000 shares directly to Giant for $150,000 on January 2,2011.Giant's percentage ownership in Penguin immediately after the purchase of the additional stock is

On September 1,2011,Beck Corporation acquired an 80% interest in Johnsen Corporation for $700,000.Johnsen's stockholders' equity at January 1,2011 consisted of $200,000 of Common Stock and $600,000 of Retained Earnings.The book values of its assets and liabilities were equal to their respective fair values on this date.All excess purchase cost was attributed to goodwill. During 2011,Johnsen uniformly earned $78,000 and paid dividends of $9,000 on each of four dates: February 1,June 1,August 1,and December 1. Required: Compute the following: 1.Implied goodwill associated with Johnsen Corporation based on Beck's purchase price on September 1,2011. 2.Beck's income from Johnsen for 2011. 3.Preacquisition income for Beck Corporation and Subsidiary for 2011. 4.Noncontrolling interest share for 2011. 5.What is the balance in Beck's Investment in Johnsen account at December 31,2011?