39. Minority interest is reported within stockholders\' equity on the consolidat
ID: 2393927 • Letter: 3
Question
39. Minority interest is reported within stockholders' equity on the consolidated balance sheet. b. as a revenue item on the consolidated income statement c. as an asset on the consolidated balance sheet. d. as a current liability on the consolidated balance sheet. 40. Isber Corporation purchases 80 percent of the voting stock of Bossart Corporation for $175,000. A the date of acquisition, the fair market value of Bossart's identifiable net assets was equal to their book value. Bossart has common stock of $80,000 and retained earnings of S120,000. Based solely on the above facts, the consolidated balance sheet would include goodwill of $15,000. negative goodwill of $25,000. minority interest of $35,000. an investment in Bossart Corporation of $175,000. a. b. c. d. 41. Elkwood Corporation acquired a land site with a building by issuing a 30-year mortgage payable. In Elkwood's statement of cash flows, this transaction should be showrn a. as both a cash flow from investing activity and a cash flow from financing activity b. only as a cash flow from investing activity for the purchase of the land and building. c. in the schedule of noncash investing and financing transactions. d. only as a cash flow from financing activity for the issuance of the mortgage payable. 42. Royer Corporation engaged in this transaction: Amortization of a patent. Assume use of the indirect approach Indicate which section, if any, each transaction would appear in, or relate to, on a statement of cash flows. a. b. c. d. Financing activities section Operating activities section Schedule of noncash investing and financing transactions Investing activities section 43. If the indirect method is used to prepare a statement of cash flows, which of the following would be deducted from net income to arrive at net cash flows from operating activities? a. b. c. d. Increase in income taxes payable Increase in accrued liabilities Decrease in prepaid expenses Increase in accounts receivableExplanation / Answer
Minority Interest is the portion of a subsidary corporation's stock that is not owned by the parent corporation.
Accounting Treatment:
The Minority Interest as per the IFRS (International Financial Reporting Standards) is shown at the bottom of the Equity Section on the Consolidated Balance Sheet and then on the Statement of Change in Equity.
Therefore answer is: Part (a)
Isber Corporation purchased 80% of voting stock at $175,000
Total Fair Market value of Bossart Corporation is $200,000 ( Common Stock of $80,000 + Reatined Earning of $120,000)
Isber Corporation's Purchased 80% Voting stock Fair Market Value is = $200,000*80%
= $160,000
Now,
Goodwill = Purchase Price Paid - Fair market value of stock acquired
= 175,000 - 160,000
= $15,000
Therefore , Answer is : Part (a).
Purchase of Long Term Asset is classified as ' Cash Flow from Investing Activities' and is reported under investing activities section of statement of cash flow.
Therefore Elkwood Corporation's acquisition of Land site with a building will be shown as a Cash Flow from investing activity.
Financing Activity accounts for external activities that allow a firm to raise capital. Hence, the 30 Year Mortgage will be shown as a Cash Flow from Financing Activity.
Therefore answer is: Part (a)
Patent is an Intangible Asset.
The treatment of Amortization of Intangible Asset is similar to depreciation, amortization is a Non Cash Expense and is added back to net operating income in operating activities section in the indirect method.
Therefore answer is : Part (b)
Account Receivable is an Asset.
An increse in Accounts Receivable during the year means that the sales were made during the year, but the cash was not collected. This means there is a reduction in cash flow and the adjustment would be to reduce the increse in accounts receivable from net income to arrive at net cash flow from Operating Activities.
Therefore, Answer is : Part (d)
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