Q.4. On January 1, 2015, Parent Company purchased 70% interest in the common sto
ID: 2403262 • Letter: Q
Question
Q.4. On January 1, 2015, Parent Company purchased 70% interest in the common stock of Subsidiary Company for O.R 1,000,000. The difference between implied and book value relates to the subsidiary's goodwill The following information is from the consolidated retained earnings section of the consolidated statements workpaper for the year ended December 31, 2015: Consolidated balances Subsidiary Company 1/01/15 retained earnings Net income 220,000 Dividends declared (80.000) 12/31/15 retained earnings O.R 300,000 O.R 1,400,000 680,000 (140,000) O.R 440.000 R 1.940.000 Subsidiary Company's stockholders' equity includes only common stock and retained earnings. With book value of O.R 1,350,000 at the date of acquisition. Instructions: a. Prepare the workpaper eliminating entries for a consolidated statements workpaper on December 31, 2015. Parent Company uses the cost method. .7 marks) o. Compute the total noncontrolling interest to be reported on the consolidated balance sheet on December 31, 2015. .....(3 marks)Explanation / Answer
Company Implied Value
Parent Price (70%)
NCI Value (30%)
Price Paid for Investment
1428571
1000000
428571
Less: Book Value of Interest acquired
Total Equity
-1350000
-945000
-405000
Excess of Cost over book value
78571
55000
23571
Differential of IV and BV applicable:
Goodwill
78571
a) Elimination Entries:
b) Total Non-Controlling Interest at Dec. 31, 2015
Non-controlling interest on Jan.1, 2015
428571
Add: Share of Net Income (220000*30%)
66000
Less: Share of Dividends Declared (80,000*30%)
-24000
42000
Non-controlling Interest on Dec. 31, 2015
470571
Company Implied Value
Parent Price (70%)
NCI Value (30%)
Price Paid for Investment
1428571
1000000
428571
Less: Book Value of Interest acquired
Total Equity
-1350000
-945000
-405000
Excess of Cost over book value
78571
55000
23571
Differential of IV and BV applicable:
Goodwill
78571
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