Exam 9: Indirect and Mutual Holdings

Consolidation procedures for direct and indirect holdings are the same.

On January 1,2014,Adam Corporation purchased a 90% interest in Rodney Corporation.On January 1,2014,Rodney Corporation purchased an 80% interest in Ben Corporation. In all investment acquisitions,the cost of the interest was equal to the book value of the interest and the fair value of the interest.The following information is available for 2014: Purchase Cost Net Income (Net Loss) for 2014 Adam \ 1,000,000 \ 200,000 Rodney \ 10,000 (\ 10,000) Ben \ 15,000 \ 50,000 The separate net incomes do not include investment income. Required: 1.What is controlling interest share of consolidated net income for 2014? 2.What is noncontrolling interest shares of consolidated net income for 2014?

Use the following information to answer the question(s) below. Paint Corporation owns 82% of Achille Corporation and Achille Corporation owns 80% of Badrack Corporation. For the current year, the separate net incomes (excluding investment income) of Paint, Achille, and Badrack are $120,000, $100,000, and $50,000, respectively. The cost of each investment was equal to the book value of the investment, which was also equal to the fair value. -Controlling interest share of consolidated net income for Paint Corporation and Subsidiaries is:

Mutually held stock is subsidiaries holding the stock of each other.

Use the following information to answer the question(s) below. Paiva Corporation owns 80% of Ackroyd Corporation's outstanding common stock and Ackroyd owns 80% of the outstanding common stock of Bailey Corporation. Bailey Corporation owns 10% of the outstanding common stock of Ackroyd Corporation. The cost of the investments was equal to book value and there were not fair value/book value differences for the investments. The separate net incomes for the three affiliated companies for the year ended December 31, 2014 (excluding investment income) are as follows: Paiva Corporation, $100,000, Ackroyd Corporation, $50,000, and Bailey Corporation, $30,000. Use the conventional approach. Symbols used: -Bailey's noncontrolling interest share for 2014 is

On January 1,2014,Wrobel Company acquired a 90 percent interest in Sally Company for $270,000.On January 1,2014,Sally's total stockholders' equity was $300,000.The fair value and book value of Sally's individual assets and liabilities were equal. On January 2,2014,Sally Company acquired a 10 percent interest in Wrobel Company for $70,000.On January 2,2014,Wrobel's total stockholders' equity was $700,000.The fair value and book value of Wrobel's individual assets and liabilities were equal. For the year ending December 31,2014,the following data is available: Netincome Dividends Wrobel Company \ 50,000 \ 0 Sally Company \ 30,000 \ 0 The treasury stock method is used to account for the mutual stock holdings between Wrobel and Sally.The separate net incomes do not include investment income. Required: 1.What is Sally's income from Wrobel for 2014? 2.What is Wrobel's income from Sally for 2014? 3.What is the noncontrolling interest share associated with Sally Company for 2014? 4.Prepare the elimination entry for Sally's Investment in Wrobel Company.

The treasury stock approach to account for parent stock held by subsidiary accounts for the stock as treasury stock for the consolidated entity.

Pallet Corporation owns 80% of Adelt Corporation and Adelt owns 60% of Bajo Inc.Which of the following is correct?

Use the following information to answer the question(s) below. Paiva Corporation owns 80% of Ackroyd Corporation's outstanding common stock and Ackroyd owns 80% of the outstanding common stock of Bailey Corporation. Bailey Corporation owns 10% of the outstanding common stock of Ackroyd Corporation. The cost of the investments was equal to book value and there were not fair value/book value differences for the investments. The separate net incomes for the three affiliated companies for the year ended December 31, 2014 (excluding investment income) are as follows: Paiva Corporation, $100,000, Ackroyd Corporation, $50,000, and Bailey Corporation, $30,000. Use the conventional approach. Symbols used: -Ackroyd's noncontrolling interest share for 2014 is

On January 1,2014,Pauline Company acquired 90% of Stephen Company at a cost of $90,000.On January 1,2014,Stephen Company acquired 10% of Pauline Company at a cost of $10,000. On January 1,2014,the following data is available: Common Stock \ 50,000 Common Stock \ 50,000 Retained Earnings \ 50,000 Retained Earnings \ 50,000 Assets fair value \ 100,000 Assets fair value \ 100,000 Assets book value \ 100,000 Assets book value \ 100,000 L.iabilities \ 0 L.iabilities \ 0 At December 31,2014,the following data is available: On Pauline Books: On Stephen Books: Assuming the treasury stock method is used,what elimination entry is needed for the Investment in Pauline at December 31,2014?

Paine Corporation owns 90% of Achan Corporation,Achan Corporation owns 85% of Badge Corporation,and Badge Corporation owns 5% of Achan Corporation.The separate net incomes (excluding investment income)of Paine,Achan,and Badge are $400,000,$160,000,and $220,000,respectively.Assume the investments were acquired at a cost equal to the book value of each investment,which also equals the fair value. Required: 1.Calculate revised net incomes for Paine,Achan,and Badge by using the conventional method. 2.Determine the controlling interest share of consolidated net income and the noncontrolling interest shares.

Use the following information to answer the question(s) below. Pace Corporation owns 70% of Abaza Corporation and 60% of Babon Corporation. Abaza Corporation owns 20% of Babon Corporation. Pace's investment in Abaza was consummated in one transaction at a purchase price $20,000 in excess of the book value. Pace's purchase of Babon was made in one transaction at a price $30,000 above book value. Abaza's investment in Babon was completed in one transaction at a purchase price $10,000 in excess of the book value. The purchase price differential for all three investments was attributable to goodwill. (There were no fair value/book value differences in assets and liabilities for each investment.) Pace's separate net income for the current year is $100,000. Abaza's separate net income is $190,000, which includes a $10,000 unrealized loss on the sale of land to Pace. Babon's separate net income is $150,000. Separate net incomes exclude investment income. -The controlling interest share of consolidated net income for the current year is

On January 1,2014,Paul Corporation acquired a 90% interest in Satorius Company for $360,000 when Satorius' stockholders' equity was $400,000; with Common stock of $200,000 and Retained earnings of $200,000. On January 1,2014,Satorius Company purchased a 10% interest in Paul Company for $90,000 when Paul's total stockholders' equity was $900,000; with Common stock of $500,000 and Retained earnings of $400,000. The following data was available for the year ending December 31,2014: Peul Company Satorius Company Net income \ 150,000 \ 130,000 Dividends 0 0 Use the conventional approach to account for the mutually-held stock.Assume there were no book value/fair value differentials for each investment.The separate net incomes do not include investment income. Required: 1.Prepare the journal entry for Paul on January 1,2014. 2.Prepare the journal entry for Satorius on January 1,2014. 3.Prepare the journal entry to record the constructive retirement of 10% of Paul's outstanding stock due to Satorius' purchase of Paul's stock. 4.Determine the incomes of Paul and Satorius on a consolidated basis with mutual income for 2014 using simultaneous equations. 5.What is controlling interest share of consolidated net income and noncontrolling interest shares for 2014? 6.What is consolidated net income?

On January 1,2014,Singh Company acquired an 80 percent interest in Gonzalez Company for $300,000.On January 1,2014,Gonzalez's total stockholders' equity was $375,000.The fair value and book value of Gonzalez's individual assets and liabilities were equal. On January 2,2014,Gonzalez Company acquired a 10 percent interest in Singh Company for $50,000.On January 2,2014,Singh's total stockholders' equity was $500,000.The fair value and book value of Singh's individual assets and liabilities were equal. For the year ending December 31,2014,the following data is available: Netincome Dividends Singh Company \ 40,000 \ 0 Gonzalez Company \ 10,000 \ 0 The treasury stock method is used to account for the mutual stock holdings between Singh and Gonzalez.The separate net incomes do not include investment income.A partial consolidating worksheet is below. Required: Prepare the elimination entries for the year ending December 31,2014. Do not enter them onto the worksheet.Instead,list them below.

Pablo Corporation acquired 60% of Abagia Corporation on January 1,2013,at a cost of $20,000 in excess of book value.Also,on July 1,2013,Pablo acquired 60% of Babin Corporation at book value.On January 1,2014,Abagia acquired a 20% interest in Babin at a cost of $10,000 in excess of book value.The excess purchase costs paid by Pablo and Abagia were attributed to goodwill. On July 1,2014,Pablo sold land with a book value of $20,000 to Abagia for $40,000.The $20,000 unrealized gain is included in Pablo's separate income.Separate net incomes for the affiliated companies (excluding investment income)for 2014 are: Pablo \ 250,000 Abagia 70,000 Babin 100,000 Controlling interest share of consolidated net income for 2014 is

Paik Corporation owns 80% of Acdol Corporation and 60% of Ben Corporation.Acdol Corporation owns 10% of Ben Corporation.All subsidiary investments were acquired at book value.There are no fair value/book value differentials associated with each investment.Separate net incomes (excluding investment income)of the affiliated companies for 2014 are: $\text { Paik: } \quad \$ 600,000 \text { which includes \$60,000 unrealized losses on inventcry items sold to Ben }$ $\text { Acdol: } \quad\$ 360,000$ $\text { Ben: } \quad \$ 340,000 \text { whirh includes } \$ 100,000 \text { unrealized profit on land sold to Acdol }$ Required: Determine controlling interest share of consolidated net income and noncontrolling interest shares for Paik Corporation and Subsidiaries for 2014.

Use the following information to answer the question(s) below. Pahm Corporation owns 80% of the outstanding voting common stock of Abussi Corporation, which was purchased for $60,000 over Abussi's book value. The excess purchase price was attributable to goodwill. Abussi Corporation owns 60% of the outstanding common stock of Badock Corporation, which was purchased at book value. The separate net incomes of Pahm, Abussi, and Badock (excluding investment income) for the year are $200,000, $240,000, and $260,000, respectively. There were no fair value/book value differences in the assets and liabilities of Pahm, Abussi and Badock. -The amount of income for the current year assigned to the noncontrolling shareholders of Abussi Corporation is

Separate earnings and investment percentages for three affiliates for 2014 are as follows: Assume the investments were acquired at a cost equal to the book value of each investment,which also equals the fair value.Separate earnings do not include investment income. Required: 1.Calculate revised net incomes for Palace,Acres,and Bain by using the conventional method. 2.Determine the controlling interest share of consolidated net income and the noncontrolling interest shares.

Packer Corporation owns 100% of Abel Corporation,Abel Corporation owns 95% of Bacon Corporation and Bacon Corporation owns 80% of Cab Corporation.The separate net incomes (excluding investment income)of Packer,Abel,Bacon,and Cab are $300,000,$100,000,$200,000,and $300,000,respectively.All of the investments were made at times when the investee's book values were equal to their fair values.There were no cost/book value differentials for each investment. Required: Determine the controlling interest share of consolidated net income and noncontrolling interest shares for Packer Corporation and Subsidiaries for the current year.

Paco Corporation owns 90% of Aber Corporation,Aber Corporation owns 85% of Back Corporation,and Back Corporation owns 5% of Aber Corporation.The separate net incomes (excluding investment income)of Paco,Aber,and Back are $100,000,$40,000,and $55,000,respectively.Assume the investments were acquired at a cost equal to the book value of each investment,which also equals the fair value. Required: 1.Calculate revised net incomes for Paco,Aber,and Back by using the conventional method. 2.Determine the controlling interest share of consolidated net income and the noncontrolling interest shares.