Golden Company acquired 90% of the the following data for 2017. common stock of

Question

Golden Company acquired 90% of the the following data for 2017. common stock of Silver Company in 2016. The two companies had Golden Silver 2017 Net Income (Internally Generated) Dividends 50,000 14,000 200,000 23,000 34. What is the NCI's share of consolidated net income for 2017? a. $25,000 b. $3,600 $5,000 d. $21,300 e. None of these. 35. What entry is journalized in Golden Company's individual books to record their share of Silver Company's dividends for 2012? Assume that Golden Company uses the simple equity method to account for their investment in Silver Company. a. Debit Dividends Receivable $12,600, Credit Investment in Silver Company $12,600 b. Debit Subsidiary (or Dividend) Income $12,600, Credit Dividends Declared $12,600 c. Debit Dividends Receivable $12,60o, Credit Subsidiary (or Dividend) Income $12,600 d. Debit Investment in Silver Company $12,600, Credit Dividends Declared $12,6000 36. Assume that on January 1 2017, Silver Company sold equipment that had a book value of $10,000 to Golden Company for $14,000. The equipment has a remaining useful life of four years and zero salvage value. Both companies use the straight line depreciation method. What is the net effect of eliminating this intercompany transaction on consolidated income for 2017 (i.e., what is the net adjustment in income distribution schedules)? a. An increase of $4,000 b. An increase of $3,000 c. A decrease of $4,000 d. A decrease of $1,000 e. A decrease of $3,000 End of three items

Explanation / Answer

34. b $ 3600

Explanation:

When income is earned it will be distributed as:

Golden : 50,000*90%= $ 45000

NCI ; 50000*10% = $5000

Dividend declaration will reduce the income :

Golden : 14000*90%=12600

NCI : 14000*10% =1400

NCI= 5000-1400= $ 3600

35. C.

Explanation:

Dividend from the post acquisition period is considered as a revenue receipt for holding company. so, dividend receivable will be debited as income to be received.

36. e. decrease of $ 3000

Explanation:

A total profit of $ 4000 was there out of which $ 1000( 14000-10000/4) has already been written of by the Golden company. so, net profit of $ 3000 should be decreased.   

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