Exam 8: Consolidations - Changes in Ownership Interests

If an acquisition by a parent of a subsidiary occurs during the accounting period,adjustments must be made for the income earned by a subsidiary prior to the acquisition date.

On September 1,2013,Beck Corporation acquired an 80% interest in Johnsen Corporation for $700,000.Johnsen's stockholders' equity at January 1,2013 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 2013,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 1,2013. 2.Beck's income from Johnsen for 2013. 3.Preacquisition income for Beck Corporation and Subsidiary for 2013. 4.Noncontrolling interest share for 2013. 5.What is the balance in Beck's Investment in Johnsen account at December 31,2013?

On December 31,2013,Maria Corporation has the following stockholders' equity: Common stock, \1 0 par \ 100,000 Additional paid-in capital 20,000 Retained earnings \ 80,000 Total stockholders' equity \ 200,000 On January 1,2014,Maria Corporation declared and issued a 10% stock dividend when the market price per share was $50. On January 2,2014,James Corporation purchased an 80% interest in Maria Corporation for $160,000 from the open market.On January 2,2014,the fair value of Maria's individual assets and liabilities was equal to book value. Required: 1.Prepare the journal entry(ies)for Maria Corporation on January 1,2014. 2.Prepare the journal entry(ies)for James Corporation on January 2,2014. 3.Prepare the elimination entry(ies)for consolidating work papers on January 2,2014. 4.Prepare the elimination entry(ies)for consolidating work papers on January 2,2014 if the 10% stock dividend is not declared and issued on January 1,2014.

The GAAP requires that the parent corporation account for the effect of decreased ownership percentage as an equity transaction.

Use the following information to answer the question(s) below. On December 31, 2013, 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, 2014, 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 2,2014.Giant's percentage ownership in Penguin immediately after the purchase of the additional stock is

Preacquisition dividends are dividends paid on stock by the subsidiary before the date of acquisition by the parent.

Use the following information to answer the question(s) below. Bird Corporation purchased an 80% interest in Brush Corporation on July 1, 2013 at its book value, and on January 1, 2014 its Investment in Brush account was $300,000, equal to its book value. Brush's net income for 2014 was $99,000 (earned uniformly); no dividends were declared. On March 1, 2014, Bird reduced its interest in Brush by selling a 20% interest, one-fourth of its investment, for $84,000. -If Bird uses the "actual-sale-date" sales assumption,its gain on the sale and income from Brush for 2014 will be

A stock dividend by a subsidiary causes

At December 31,2013,the stockholders' equity of Godwin Corporation and its 80%-owned subsidiary,Goldberg Corporation,are as follows: Godwin Goldberg Common stock, \ 10 par value \ 20,000 \ 12,000 Retained earnings Totals \ 28,000 \ 18,000 Godwin's Investment in Goldberg is equal to 80 percent of Goldberg's book value.Goldberg Corporation issued 225 additional shares of common stock directly to Godwin on January 1,2014 at $28 per share. Required: 1.Compute the balance in Godwin's Investment in Goldberg account on January 1,2014 after the new investment is recorded. 2.Determine the increase or decrease in goodwill from Godwin's new investment in the 225 Goldberg shares.Use four decimal places for the ownership percentage.Assume the fair value and book value of Goldberg's assets and liabilities are equal.

On December 31,2013,Potter Corporation has the following stockholders' equity: Common stock, \1 0 par \ 200,000 Retained earnings Total stockholders' equity \ 300,000 On January 1,2014,Potter Corporation declared and issued a 10% stock dividend when the market price per share was $50. On January 2,2014,Corrao Corporation purchased an 80% interest in Potter Corporation for $250,000 on the open market.On January 2,2014,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 1,2014. 2.Prepare the journal entry(ies)for Corrao Corporation on January 2,2014. 3.Prepare the elimination entry(ies)for consolidating work papers on January 2,2014. 4.Prepare the elimination entry(ies)for consolidating work papers on January 2,2014 if the 10% stock dividend is not declared and issued on January 1,2014.